Energy powers ethical investment debate

Energy powers ethical investment debate
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The fractured investment and planning history of Queensland’s Adani coal mine could stand as a case study in global energy investment decisions revealed in the International Energy Agency’s latest annual review. The IEA’s World Energy Investment 2019 report, released in May, revealed that capital spending on oil, gas and coal supply bounced back, while investment stalled for energy efficiency and renewables.

But it also recognised the two-pronged nature of coal as an energy source: that while investment in new coal mines had declined, it still represented an important part of the world’s energy mix.

The IEA report found that even though decisions to invest in coal-fired power plants declined to their lowest level this century and retirements rose, the global coal power fleet continued to expand, particularly in developing Asian countries.

Coal from the Adani mine is thought to be destined for India, where there is a continuing demand for cheap power.

The IEA report said that the continuing investments in coal plants appear to be aimed at filling a growing gap between soaring demand for power and a levelling of expected generation from low-carbon investments.

Without carbon capture technology or incentives for earlier retirements, coal power and the high carbon emissions it produces would remain part of the global energy system for many years to come. 

“Energy investments now face unprecedented uncertainties, with shifts in markets, policies and technologies,” IEA Executive Director, Dr Fatih Birol, said. “But the bottom line is that the world is not investing enough in traditional elements of supply to maintain today’s consumption patterns, nor is it investing enough in cleaner energy technologies to change course. Whichever way you look, we are storing up risks for the future.”

The Adani mine began in 2010 as a $16.5 billion investment with a plan for six open-cut and five underground mines with 400km of railway to be built to connect the project to a single user terminal at Abbot Point. The plan envisaged production of 60 million tonnes per annum by 2022 with 10,000 job opportunities during construction.

Nic Pollock, CCO at K2fly – who will canvas social licence to operate imperatives at the International Mining and Resources Conference (IMARC) in late October – says a lack of funding caused the company to rethink that plan, with Australia’s big four banks saying in 2015 that they had no appetite to invest in new coal projects. 

And that reluctance continued. A report released in February this year by the Institute of Energy Economics and Financial Analysis found that more than 100 major global financial institutions have divested from thermal coal, including the top 40 global banks and 20 globally significant insurers.

By the end of 2018, 415 global investors managing a collective $US32 trillion called for a complete thermal coal phase-out by 2030 across the OECD. China is also committed to phasing out coal.

According to Mr Pollock, this exodus of funding illustrates a bigger point: 2019 looks as if it will be the year when environmental, social and governance considerations move from a specialised niche into the mainstream. 

“Financiers and chief executives are realising that ignoring ESG issues is a business risk,” Mr Pollock said. 

Sustainable investment has grown by more than one third since 2016, with assets of more than $30 trillion at the start of last year. 

“In Queensland this year we witnessed global mining company Rio Tinto divest from thermal coal, with other majors including BHP and Glencore vowing to transition out of the commodity sooner than expected,” Mr Pollock said. 

BHP has said it has no appetite to grow existing thermal coal projects and Glencore said earlier this year it would cap coal output at current levels.

Glencore said it made the decision to cap global thermal and coking coal production at the current level of about 145 million tonnes after holding talks with the Climate Action 100+ initiative – an investor initiative launched in 2017 to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. 

The group includes several major Australian superannuation funds such as AMP Capital, AustralianSuper, Cbus, IFM Investors, QSuper and BT Financial Group.

The lack of access to capital forced the Adani proponents to revise and fund the project.

It became a $2 billion investment with a single open-cut mine with production of up to 27.5Mtpa and around 1,500 jobs in the construction phase. 

The wider energy mix debate including renewables, decarbonisation and hydrogen will be discussed in greater detail at IMARC, with dedicated conferences on both energy and social licence to operate. BHP, Rio Tinto and Glencore will be among the 300 thought leaders presenting throughout the three-day event.  

The International Mining and Resources Conference is Australia’s largest mining event. Bringing together 7000 decision makers, mining leaders, policy makers, investors, commodity buyers, technical experts, innovators and educators from over 100 countries for four days of learning, deal-making and unparalleled networking.

IMARC will run from 28-31 October 2019 at the Melbourne Convention and Exhibition Centre. For more information visit https://imarcmelbourne.com


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