AGL AGM: Blackrock support demonstrates Australian investors lag foreign peers

The push by the Australasian Centre for Corporate Responsibility​ (ACCR) for AGL Energy Limited (ASX:AGL) to bring forward the closure dates of its coal-fired power stations continues to build momentum, despite a disappointing showing by proxy advisors and key investor signatories to the Climate Action 100+ initiative.

While key Australian investors, superannuation funds and proxy advisors voted against the resolution, Blackrock, the world’s largest asset manager, voted in support of ACCR’s proposal.

This resolution was based on AGL’s own FY2020 scenario analysis which shows that in order to limit global warming to 1.5°C above pre-industrial levels, AGL would have to close its three remaining coal-fired power stations by approximately 2036 - as opposed to the scheduled closure of Loy Yang in 2048, announced in 2015.

The resolution was supported by 19.96% of shareholders (see results in ASX notice).

Commenting on the response to the resolution, Dan Gocher, Director of Climate and Environment, said:

“Blackrock’s support for this resolution embarrasses Australian super funds and asset managers who voted against the resolution. It demonstrates an increasing trend that European and US investors are more prepared to take critical action to address climate risk.

“Lead investor for engagement with AGL in the Climate Action 100+ initiative, Aware Super (formerly First State Super) has previously said that 'Climate change clearly poses the most significant risk to investment portfolios over the long term'. Yet Aware Super justified voting against the resolution, claiming it was “not commercial” to close coal-fired power stations by the mid 2030s.

“Do signatories to the Climate Action 100+ initiative stand for climate action in line with the Paris Agreement, or do they only act when it is “commercial” to do so? It’s not commercial for AGL to keep running coal plants beyond the 2030s that cost more than they earn.

“Far too many Australian investors live in fear of blowback from a government committed to stalling progress on climate action. Increasingly, European and US investors see through the bluster and vote for what is in the best long-term interests of shareholders.

“As Blackrock rightly pointed out — AGL’s operational emissions cannot be taken lightly, they made up approximately 8% of Australia’s total emissions in 2019/20.

“AGL continues to evade any substantive commitment to reduce emissions beyond the closure of Liddell in 2023 — most importantly, by failing to bring forward the closure of its remaining coal-fired power stations, which investors have long been asking of AGL.”

“Many investors have failed to grapple with the key issue facing AGL, specifically whether Loy Yang A will actually survive beyond the mid-2030s. Even though it was built at the same time as Bayswayer (1984-88), AGL plans to keep it open for 14 years longer. In 2018, AGL’s own executives admitted that 2038 was the more likely closure date.

“AGL’s ‘sustaining’ capital expenditure has more than doubled from $255 million in FY2014 to $536 million in FY2020. This trend is likely to continue as Bayswater and Loy Yang A age, as the costs of maintenance eat into earnings.

“Investors appear to have missed the point that this allocation of capital expenditure not only affects earnings, but limits AGL’s ability to fund a much quicker transition.

“The share of coal power generation in the National Electricity Market hit a record low last month. The more renewable energy grows, the more pressure is placed on ageing coal-fired power stations to be more responsive, which they are simply not designed to do.”

Background

See ACCR’s Investor Briefing on the resolution to AGL (2020).

Key background links:

• AGL Climate Statement (2020)
• AGL AGM 2019 - “The Paris accord is an agreement between countries, not an agreement that binds companies”
• Standing firm on the Paris Agreement (2017) - “Our plan is consistent with the best available science on climate change mitigation, and in particular Australia's international obligations under the Paris Agreement.”
• Carbon Constrained Future (2016) - “AGL accepts the Intergovernmental Panel on Climate Change (IPCC) conclusion that: warming of the climate is unequivocal; anthropogenic greenhouse gas emissions are extremely likely to be the cause; and that the risks associated with climate change are reduced substantially if warming is limited to less than 2 degrees Celsius above pre-industrial levels.”
• AGL’s Greenhouse Gas Policy (2015)