Did you know that over 90% of consumers expect businesses to act ethically?
Australian Ethical prides itself on being a business model that acts as ethically as possible, but we don’t think it’s enough just to do this ourselves. We actively advocate for other parts of society to become more ethical too.
Here’s a roundup of some of the advocacy work that our in-house ethics team have been up to in the last 12 months:
- Engaging the Government on why Australia doesn’t need an Adani mine
- Rallying G20 nations to stop fossil fuel subsidies
- Asking insurance companies what they’re doing about climate change
- Providing a submission to our Government on the 2017 Review of Climate Change Policies
- Continuing to pressure the big banks to act better
- Investigating the link between renewables and human rights
- Attending or speaking at Forums advocating impact investing and human rights
- Urging movie studios to stop showing smoking in films
- Promoting gender equity on boards
- Calling for action on modern-day slavery
- Engaging to stop the harm caused by overuse of antibiotics in farming
- Shareholder resolutions at AGMs
1. Engaging the Government on why Australia doesn’t need an Adani mine
Australian climate policy is a disaster. We need a zero-emissions goal, a carbon price, removal of fossil fuel subsidies, support for clean technology and an end to deforestation. Amidst all this there is extraordinary talk of public money being used to support an Adani Carmichael coal mine through the Northern Australia Infrastructure Facility (NAIF).
In August this year we put in a submission to the Senate Enquiry on NAIF and participated in discussions with NAIF executives. We called for clear guidelines and processes to ensure that government support is given for infrastructure which creates public benefit and not to subsidise private interests, particularly interests that threaten such tremendous harm as an Adani Carmichael mine. We expect an announcement of the first NAIF funding decisions before the end of this year.
The burning of fossil fuels is the most significant driver of carbon emissions, which contribute to climate change. Yet governments across the globe continue to support subsidies for coal, oil and gas. These subsidies make clean energy alternatives like renewables less competitive: if renewables don’t get funding, they can’t continue to innovate and drive down their prices.
The truth is, subsidies just don’t make economic sense on a broader level, as there’s ample evidence of how coal is likely to become a stranded asset. There are already more reserves of fossil fuels available than are safe to burn, if we want to keep warming below 2°C. Having an oversupply of fossil fuel as the world increasingly moves to renewables could see companies left with stranded assets – in this case, fossil fuels that have lost their value. And the world is moving to renewables, especially since the Paris Climate Change Agreement set and signed off on global climate goals.
What’s more, supporting fossil fuels through subsidies contributes to pollution, which has proven harmful effects on society’s health and wellbeing; just look to China, where coal-fired power plants are being phased out to prevent terrible air-quality in Beijing.
We believe that governments need to stop propping up the fossil fuel industry – and plenty of investors agree with us. We recently signed a joint statement with other investors which collectively manage $2.8 trillion in assets, calling for the governments of G20 nations to end fossil fuel subsidies by 2020. This includes three of the world’s biggest insurers; Aviva, Aegon and Amlin. Since the letter was signed in August last year, China, the European Union, Australia and others have confirmed their support for the Paris Agreement.
Health insurers also have a role to play raising awareness of the health impacts of fossil fuels and global warming. They can help limit global warming through:
- responsible investment e.g. excluding fossil fuels and supporting renewables;
- responsible insurance e.g. excluding insurance of new fossil fuel projects and offering customer incentives for lower emissions vehicles and houses; and
- using their public voice to raise awareness of the health impacts of fossil fuels and global warming, including to encourage government climate action.
Over the past 12 months we’ve engaged with Medibank and NIB. Medibank has recently announced it will transition to low carbon investment in overseas shares, and that it will also look at low carbon options for their Australian share investments. NIB moved to a ‘socially responsible’ international investment option in 2016 which excludes thermal coal and oil sands extraction, and companies with substantial fossil fuel reserves. But they are not yet looking at a similar move for their Australian share investments.
4. Providing a submission to our Government on the 2017 Review of Climate Change Policies
Since Australian Ethical opened for business in 1986, we’ve been working towards a sustainable future by investing in clean, green technologies (among other great things). We’ve also set a target to make all our investments even more emissions friendly – to be completely zero emissions by 2050.
We act against climate change by voicing our concerns at a federal level. In our recent submission to the Federal Government’s 2017 Review of Climate Change Policies, we recommended that the Government:
- consider all the policy options presented for tackling climate change in this review – including the challenging ones;
- commit to a goal of net-zero emissions – as five of Australia’s seven states have put a price on carbon, as it’s been shown to be the most effective way to reduce emissions;
- cease subsidising the fossil fuel industry;
- rapidly increase support for clean technologies through mechanisms such as the Clean Energy Innovation Fund, the Clean Energy Finance Corporation, Australian Renewable Energy Agency, and the Renewable Energy Target; and
- put an immediate stop to the deforestation of our native forests, which act as natural carbon sinks.
The Finkel Review is a start. It now needs to be implemented by governments in line with the Paris Climate Change Agreement. Our submission reflects the urgent need for the Government to align with a 2 degree transition to meet the Paris goals.
5. Continuing to pressure the big banks to act better
We continued pressuring banks to act ethically, including asking them to rule out lending to fossil fuel projects, and also to inhibit the use of credit cards on gambling sites.
For example, in December 2016 we pressed Westpac to rule out support for the proposed Adani Carmichael mine to publicly demonstrate the integrity of the bank’s climate commitments. Since then, Westpac’s 2020 climate action plan rules out lending to the Carmichael mine.
We’ve recently supported a Market Forces shareholder resolution calling for the Commonwealth Bank (CBA) to align its business with limiting global warming to under 2 degrees. We exclude investment in CBA, but using nominal shareholdings we are able to support resolutions of this type, and meet with the company to discuss our concerns and objectives. The resolution received 3% support at the AGM but importantly the CBA Chair, Catherine Livingstone, acknowledged concerns about their fossil fuel lending, and noted that their coal funding is trending down, a trend she expects to continue.
In October this year, we raised with Bank of Queensland our concerns about the high levels of complaints made by their customers to the Financial Ombudsman. This year the bank topped the list for the fourth year in a row in terms of customer disputes for home loans. We’ll continue to watch this closely, as we think there’s plenty of opportunity for banks to improve the way they deal with their mortgage customers.
We also asked Westpac and NAB to stop use of its credit cards for online gambling to help limit impulsive and irresponsible gambling. Our credit card gambling discussions continue. A first step could be to give credit card customers the option to block gambling charges.
We asked Tesla and Johnson Controls about the risk of use of child labour for the extraction of cobalt which may end up in their batteries. As well as addressing this issue directly, we expect them to minimise cobalt use through better design and recycling. You can see more about the issue here.
7. Attending or speaking at Forums advocating impact investing and human rights
In October 2017 we presented to investor forums on impact investing (arranged by Responsible Investment Association of Australasia). Investors need to support businesses and partnerships which are innovating to fill global social and environmental needs like those identified by the Sustainable Development Goals. Goals like achieving zero hunger, reduced inequality, sustainable fisheries, clean water and effective sanitation.
Also, in April this year, our Ethics Analyst Ella McKinley (pictured in red below) joined a panel with the President of the Australian Human Rights Commission (AHRC), Prof Gillian Triggs, in a panel discussion. The panel was hosted by the AHRC and EY, where they launched their jointly produced report ‘Human Rights in Investment’. The panel affirmed that businesses that don’t consider human rights face reputational and other risks due to tightening regulation at home and abroad. They also stressed that for companies to change, investors also need to care more about human rights.
8. Urging movie studios to stop showing smoking in films
We supported an investor letter urging movie studios to prohibit tobacco use in youth-rated films (with some narrow exceptions such as where the health harms of smoking are portrayed). We will monitor improvements in movie studio tobacco policies and action. See here for more info.
9. Promoting gender equity on boards
As of August 2017, 25.4% of ASX 200 directors are women (up from 23.8% in August 2016). We think that there’s still a lot of room for improvement.
This year we started to engage with several companies we invest in which have low levels of representation of women at board and senior executive levels. And we’ve continued to contribute to the investor working group of the Australian arm of the ‘30% Club’, which works to achieve 30% of ASX 200 seats held by women by end-2018.
10. Calling for action on modern-day slavery
In April this year, Australian Ethical submitted a response for the Federal Government’s Modern Day Slavery Act Inquiry. We called for legislation that all companies should have to report on their human rights performance, to bring our country’s laws in line with the UN Guiding Principles on Business and Human Rights. We advocated that larger companies should have legal obligations to take action to stop slavery in their supply chains.
In our submission, we also supported the recommendation from the 2016 Victorian Inquiry for a national licensing scheme for labour hire companies, which followed the discovery of labour practices making people work against their will. We believe a national licensing scheme would help stop unscrupulous businesses who exploit migrant and other vulnerable workers in Australia.
The government is now consulting on the specific contents of new modern slavery legislation. We’ve emphasised to government the importance of introducing the new disclosure requirements quickly, including penalties for non-compliance. We’ve also called for a clear path for introduction of requirements for companies to act to safeguard against human rights breaches in supply chains, alongside the disclosure obligations. Read more about our first submission, and why slavery is still a problem here: Exposing modern day slavery.
11. Engaging to stop harm caused by overuse of antibiotics in farming
Over-use of antibiotics in agriculture hurts animals and humans by facilitating overcrowding of farm animals, promoting harmful growth rates and encouraging antibiotic-resistant bacteria.
We continued our local and global engagement on this issue by supporting advocacy with US chicken producer Sanderson Farms to reduce its antibiotic use and stop its public denial of the risk to human health of excessive antibiotic use (don’t worry, we don’t invest in Sanderson). So far, Australian poultry companies have stated commitments to eliminate (over time) the use of some antibiotics which are important to human health.
Shareholders can propose resolutions to be considered at company meetings like their Annual General Meeting (AGM). At Australian Ethical we put forward or support resolutions, using AGMs as an opportunity for us to encourage companies to do better.
This year, Market Forces organised shareholder resolutions for Santos and Origin Energy. Climate action by energy companies is urgently needed because not only do they directly contribute over a third of global emissions, they can also reduce the emissions of others e.g. by powering electric cars with renewable energy.
We supported the shareholder resolutions calling on Santos to better explain how its strategy addresses climate change risk, and to demonstrate alignment of business strategy with the Paris Climate Change Agreement. Santos committed to provide better reporting. We will see if that’s the case.
We also supported four shareholder resolutions asking Origin Energy for better disclosure about how they are responding to climate change including transitioning to renewables, pursuing emissions reduction targets and reducing methane leaks. The Origin disclosure resolution received about 14% shareholder support.
This month we have also supported a shareholder resolution organised by the Australian Centre for Corporate Responsibility which calls on BHP Billiton to show integrity in its lobbying and public statements on government policy, and in particular climate policy. For many years we have been dismayed by the actions of the Minerals Council of Australia, whose actions, tactics and misleading have obstructed discussion and implementation of sensible energy policy for Australia. BHP is a key member of the Minerals Council, and as a member gives both financial support and credibility to the Council. It’s long overdue that BHP either use its influence to stop the obstructive work of the Minerals Council, or it resigns its membership if this is not possible. The resolution received close to 10% shareholder support, which is a great result given that the BHP board recommended that shareholders vote against the resolution.
We don’t invest in Santos, Origin Energy or BHP because of their fossil fuels, but we used nominal holdings of their shares to support this shareholder action.
We also want to hear from you! If there’s anything you’d like us to consider advocating, send an email to email@example.com and we’ll consider your proposal.