Australian and New Zealand ESG Update

Energy Update

Coal price collapses, massive losses

Another Australian mining company has announced massive losses as thermal coal prices drop. Whitehaven lost $94.4 million in the six months to December 2020; BHP wrote down the value of its thermal coal assets by US$1.6 billion; Glencore lost over US$500 million in its Australian thermal coal business due to write-downs. The losses were put down to a pandemic-induced drop in demand and China banning Australian coal. There is also the global shift towards low-emission energy alternatives.

AGL’s half-year results show Australian power generators are not making much money on coal-powered energy. BHP is moving in the direction of minerals, not coal, but Whitehaven remains entirely dependent on coal.

BHP making inroads to a less polluting future

BHP Group has recently invested in a startup producing steel without coal, Boston Metal, backed by Bill Gates, Piva Capital and Devonshire Investors. Steelmaking is one of the most polluting practises, so new techniques are being developed. BHP pledged $400 million for research to deal with carbon emissions caused by its buyers, with a portion of bonus payments for key executives to progress on lowering greenhouse gas emissions across its operations ane in those of its customers.

Santos commits to net-zero by 2040

Santos is the first large Australian oil and gas producer to commit to net-zero by 2040 after mounting shareholder pressure. Santos introduced new targets including a reduction of up to 30 per cent by 2030 based on 2020 levels. Santos will buy nature-based offsets including tree-planting programs while incorporating more renewable energy and carbon capture and storage technology.

Whitehaven prosecuted by NSW Resources Regulator

Whitehaven Coal is being prosecuted by the NSW Resources Regulator for failing to rehabilitate land, drilling water bores and clearing land without authorisation at its Narrabri coal mine in the Pilliga East State Forest in June 2019. The Regulator rejected the miner’s proposes settlement of $542,500, as it didn’t reflect the seriousness of the alleged conduct, with the initiatives not deemed of merit.

Vanguard review turns up dirty assets in ESG fund

An ethically conscious bond fund has proved problematic after a review found holdings that were supposed to be excluded. The Vanguard Ethically Conscious Global Aggregate Bond Index invests in several thousand fixed income instruments, filtered for the usual suspects. Vanguard has informed investors that MSCI, the index provider, was not screening all holdings in the fund, just the public companies - governments and unlisted companies were not screened. It is unclear what percentage of assets in the fund were in supposedly excluded industries, nor how many of the thousands of holdings are actually screened. It is also unclear whose responsibility it was to do the screening.