The Australian National University's decision to adopt socially responsible investment criteria for managing its $1 billion investment portfolio has sparked quite a row. An increasingly frank exchange of views between the ANU and its critics has played out in the pages of the Fairfax publication The Australian Financial Review.
Those critics have included corporate leaders, academics from other universities, an academic from the ANU itself, and both Labor and Liberal politicians, including cabinet ministers and the premier of South Australia.
Not only is it hard to see the ANU's decision standing, but there may well be change in the senior leadership team.
What would have seemed to be a fairly straightforward and routine decision — after all, few people would be surprised to read that a university would or should be "socially responsible" — has turned into a public relations disaster for the ANU.
The background to the story arose after the ANU adopted a socially responsible investment (SRI) policy and contracted out for an analysis of its current investments. Those companies identified as not having passed SRI filters on the environment, human rights, corporate responsibility and governance would be sold from the portfolio. Seven such companies were identified. Then the ANU took it upon itself to adopt a name and shame policy with Vice Chancellor Ian Young describing the decision as follows: "We should not invest in companies that cause social harm."
There is an argument that simply adopting the "Wall Street walk" rather than being an activist shareholder and improving corporate behaviour to minimise social harm is itself socially irresponsible. But that argument doesn't even arise. The real problem here is that it appears the ANU had not undertaken sufficient due diligence before making its decision, and then announcing that decision to the world.
Generally speaking nobody would care much if universities didn't invest in tobacco companies or land-mine manufacturers. In fact, subject to fiduciary duties being observed few people would care much about portfolio investment decisions overall. There would always be good reason why a large portfolio would include this stock or exclude that stock. There are even good reasons why the ANU might have wanted to divest particular stocks — for example, they may have been overweight in some sectors, or formed the view that particular stocks would not perform as well as hoped, or simply needed the cash, and so on.
All of those reasons relate to the risk-return characteristics of the stocks themselves, or the risk-return characteristic of the overall portfolio. Few people would want to second guess such technical considerations that relate to portfolio management. What the ANU has done, however, is not make a technical portfolio management choice, but rather it has made a political choice.
What suggests this as being a political decision, and not an investment decision, is that the ANU council includes an individual whose day-job employer is currently recommending that investors buy two of the stocks the ANU claims are causing social harm.
Private investors can make any political choice they like; but the ANU is not a private investor. It is a public university, and can expect greater scrutiny of its actions than purely private organisations.
There is no credible evidence to support the argument that any of the companies named and shamed by the ANU are "doing harm" — quite the contrary. Some of them had won state government awards for environmental rehabilitation, and engagement with indigenous communities. One company, Santos, is listed on the Dow Jones Global Sustainability Leaders' index. Others have received strong community support for their work and business practices.
The "ANU Seven" have had their corporate reputations trashed by a sloppy process and an arrogant public institution. Understandably they are upset — this goes well beyond the sums of money involved and to the principle involved.
Australian universities simply do not have the social licence to trash the domestic economy or place the livelihoods of thousands of Australians at risk on a whim. The personal preferences of university administrators should not drive the investments decisions of those institutions. This is especially so when the basis of those investment decisions are demonstrably false.
In particular the Australian community has every right to expect that universities themselves are good corporate citizens. That means managing their portfolios responsibly and professionally. That means treating other players within the community with dignity and respect; that includes the business community. Participating in international campaigns to undermine local industry and trashing corporate reputations is not appropriate behaviour, especially for publicly funded institutions.
Perhaps the ANU senior management thought it is self-evident that business would cause social harm. Perhaps they have bought into the notion that fossil fuel producers, and other resource companies, have become "a rogue industry" that should be shunned. With such a world-view perhaps it is unsurprising that they didn't bother to double-check when their suspicions were confirmed by what appears to be shoddy research.
The Australian community, however, expects more and deserves better.
ADVERTISEMENT
No comments:
Post a Comment