The Australian National University divesting its resources stocks is a short-sighted decision which, if replicated widely, could greatly harm our wealth-creating resource industries.
Last week the Australian National University announced it would sell its share holdings in seven companies involved in the resources sector.
The companies whose shares will be sold off by the university are Santos, Newcrest Mining, Iluka Resources, Sandfire Resources, Oil Search, Independence Group, and Sirius, representing $16 million (or about one per cent) of the ANU's $1 billion of investment holdings.
This move follows a study by consultants Corporate Analysis Enhanced Responsibility (CAER), which ranked the ANU share portfolio using a range of environmental, social and governance indicators.
The ANU decision is far from an isolated case, being a small part of a co-ordinated, and highly vocal, national and global campaign of financial divestment out of coal and other fossil fuel related activities.
In Australia, the United States and in other countries, various trusts, superannuation funds, universities, and financial institutions have already jumped on the divestment bandwagon, with a threat of similar actions by others to come.
Some proponents of the divestment agenda, such as the Green-aligned Australia Institute think tank, have argued that any criticism of divestment is nothing more than a hypocritical swipe at freedom of investor action.
Clearly, individuals and institutions can choose to buy or sell equities, or abstain from the share market entirely, on whatever basis they wish in societies, such as ours, embracing a considerable measure of economic freedom.
It could also be said the ANU decision, in isolation, will likely do little to financially harm the seven companies, given that there would certainly be potential investors willing to buy those shares the ANU divests.
But it is far from hypocritical to criticise the divestment agenda for what it truly is, a restless effort at stigmatising resource companies until such time they are deprived of the very capital needed to invest and expand operations.
It is in this regard that criticism of divestment is well placed, given the financial and economic risks of a widespread embrace of withholding equity capital from coal, gas and other natural resource exploration and production firms.
And when representatives of resource companies feel that divestment is intrinsically linked to a broader agenda to sully corporate reputations in unwarranted fashion, they have a right, as much as anybody else, to speak out against the divestment agenda.
The ANU has seemingly cherry-picked the seven companies for share divesture on questionable grounds, given the good record of the companies in indigenous community engagement, environmental remediation, and the like, although notably retaining shares in larger companies such as BHP Billiton, Rio Tinto, and Woodside Petroleum.
The university's refusal to fully comply with demands for full divestment, at this time, suggests even it appreciates the well-established principle that more diversified equity portfolios provide greater prospects to achieve a sound return.
Indeed, when the best available projections from national and international energy agencies and private analysts are that global coal and gas demands will rise for decades to come, resource stock divestment appears as a foolhardy rush towards unbalanced portfolios, likely contributing to higher financial risks and lower returns.
As much as any institution, or individual, divesting themselves of resources stocks do so at their own risk, the divestment campaigner's end game of starving coalminers and others of equity capital would, if realised, have serious consequences for long run living standards.
The key argument propagated by supporters of divestment is that conventional electricity generation is associated with the release of carbon dioxide emissions into the atmosphere, and so the utilisation of these energy resources comes at a cost.
But to follow from this statement to contend that electricity generation from coal, or less-intensive carbon emitting gas, exudes an overall net cost to society is ludicrous, in light of the substantial benefits associated with conventional energy sources.
Without the coal-fired electricity predominating Australia's electricity production mix, it is impossible to contemplate a life of highly-valued economic activities generating investment and employment opportunities, a life of economic and social activities after sunset, or a life where people can escape the oppressive effects of extreme temperatures through air-conditioning or heating.
Our abundant and easily stored coal and gas resources means that Australia can disseminate these kinds of benefits more widely by playing its part in eliminating global energy poverty, whereby an estimated 1.3 people around the world still live in sufferance without electricity.
What is also not sufficiently appreciated by those arguing for divestment is that greater investment in renewable energy technologies, such as solar and wind, are not costless, either.
Wind turbines and large-scale solar farms require very extensive plots of land upon which to be established, perhaps more so than conventional electricity generation methods, and ironically require the use of steel and other materials that can only be reliably produced, with scale, through coal and other conventional energies.
Substituting renewable for conventional energy sources will likely lead to the provision of less reliable electricity for the masses, especially when, to put it bluntly, the wind doesn't blow or the sun doesn't shine.
Furthermore, on the basis of current technologies renewable energy sources produce electricity at least double the cost of coal-fired electricity, the latter which can be provided more cheaply both day and night.
This is why additional solar and wind electricity generation, as pump primed by government subsidies and regulatory holidays, has played some havoc with household electricity bills here in Australia, contributing to cost-of-living pressures.
If one is already rich and, in the case of the ANU, also has the ability to tap into taxpayer funding, it is perhaps all too easy to disengage from the latest unfashionable cause.
But the billions of poverty-stricken individuals across the developing world, and many lower-income earners around Australia, have no such luxury, and in fact desperately need more output by conventional energy companies to satisfactorily keep themselves in warmth and light.
Given the immense net benefits associated with electricity sourced from abundant, cheap, reliable coal and gas, the only ethical thing for the ANU and others engaged in divestment to do is to keep, and buy, shares in conventional energy companies.
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