And don’t forget James Murdoch, the billionaire scion who was once in line to succeed his father Rupert at the top of powerful global media company, News Corp. He launched an extraordinary attack on that company’s Australian newspapers for their climate scepticism.
BlackRock’s move to dump shares of companies primarily mining thermal coal has been dismissed by some as a marketing stunt, and in a sense it absolutely is. The firm manages $10 trillion in funds globally, the bulk of which are in passive vehicles that hold whatever shares are in the index.
The move only affects the funds held in its actively managed portfolios. And it only affects companies that generate more than a quarter of their revenue from thermal coal meaning major industry players such as Glencore and BHP would not be affected.
According to at least one rival fund manager’s calculations, the new approach would only preclude investment in companies representing just 0.3 per cent of the ASX 200 index.
Yet the move should still be raising alarm bells for local investors and policymakers.
Last year Sweden’s central bank decided to dump bonds issued by state governments of Queensland and Western Australia due to climate change concerns. That, in turn, followed an announcement by Norway’s giant sovereign wealth fund that it would ditch its holdings in fossil fuel companies, a move that’s expected to affect a number of Australian resources companies.
This country’s investment landscape is already quite conscious of ESG (environmental, social and governance) factors. Yet if BlackRock’s posturing gathers momentum and the global ESG push intensifies, Australia’s resources-heavy sharemarket could be susceptible.
All of a sudden, and assuming a worst-case scenario, the sovereign risk and capital flight fears raised in the past could be back on the table.
If that’s the case, our failure to develop technology and renewable energy sectors will be more than just a missed opportunity.
If equity markets are indeed underestimating the risks here, it wouldn’t be the first time that’s happened. During the subprime debt crisis that eventually morphed into the global financial crisis complacency in equity markets was rife.
At least back then debt and money markets were flashing up warning signals. The sustained stimulus from central banks that has pushed up prices of everything since means no such canary in the coal mine in the markets exists now. The warnings this time are arguably in the phyiscal environment.
That being said, the rally that has pushed shares to record highs might well have a lot further to run. And the sceptical investors burnt in the GFC that have sat on the sidelines have missed out on some very substantial returns.
But it seems clear the events of this summer have highlighted Australia’s perilous climate change predicament. As both a country and an investment destination.
John McDuling is National Business Editor for The Sydney Morning Herald and The Age.