The City of Newcastle council’s Tuesday night endorsement of an “environmentally and socially responsible” investment policy threw more mud than a pig wrestling competition at the country show.
The controversy thickened this morning as stories emerged that the council also recently accepted an A$12-million offer to expand coal terminals at its port, the world’s largest in terms of coal exports.
Amid jeers of hypocrisy and cheers of climate leadership, what can we really say about this policy move in one of New South Wales’ historic coal towns?
Investment, not divestment
The council’s unprecedented move to adopt an investment policy which applies traditional investment criteria but also adds a “preference for environmentally and socially responsible investment (if criteria are met)” might rate a media mention, given the recent fossil fuel divestment move by certain universities and governments.
But Newcastle’s historical dependence on coal means that the council’s decision sparked a media frenzy and councillors have been in overdrive explaining the policy and their position towards the region’s major industry.
Defending both the nuance and intention of the Investment Policy, Newcastle Lord Mayor Nuatali Nelmes explained to ABC Newcastle that “it is not at all and never will be about undermining the coal industry”.
Will the policy lead to fossil fuel divestment?
The answer is, possibly but perhaps not probably. While it is difficult to be certain because the policy could not be located online this morning – although it had been released locally for public scrutiny before Tuesday’s vote — we can look to other, major institutional environmental, social and governance (ESG) investment policies.
Many superannuation funds, for instance, have for several years offered their members the choice of an ESG investment option. Given that traditional investment criteria are applied prior to ESG criteria, as per the Newcastle Council’s policy, it is still the case that these traditional criteria tend to weight decisions away from full divestment.
AustralianSuper’s top 10 most “sustainable” shares, for example, include all of the big four banks.
Or as Cbus Super explains about their ESG investment policy:
The integration of ESG in the investment process does not mean the exclusion of particular companies on ethical grounds. Instead, integration of ESG requires that the impact of any ESG issues on the value of a company is included in the valuation process.
As Nelmes told ABC Newcastle, investment in fossil fuels is only one of many ESG criteria considered under the council’s policy. She noted that other investment criteria include things like equal opportunity, fair housing and provision of a living wage, fair trade, human health and aged care:
There are a lot of sectors of employment… We have to make sure that this economy in this region is diversified against shocks in any industry.
The identity of Newcastle is steeped in the history of Australian mining. The coal sector has provided industry and growth to the area since the 1850s, and it is this reliance that fuels much of the backlash against the policy.
The investment policy stoush signals competing ideas about what Newcastle is and how residents, government and industry envision its future. The policy appears to be opening up a crucial debate which Newcastle will need to have at some point.
Although industry figures suggest that Australia’s coal sector retains a global competitive advantage, coal is necessarily a finite resource, with black coal anticipated to have just over a century of reserves remaining. This may seem like ages, but it is prudent and important for Newcastle to begin thinking about this future now.
The support for the investment policy also suggests an important shift in local community sentiment and changing values about both local community identity and the environment.
Even though industry may argue that it remains globally competitive, reports say that over 3,000 Hunter mining jobs were lost in the past two years. At the same time, community members report concern about the local and global environmental effects of coal.
These local experiences and shifting beliefs play an important role in how Newcastle understands itself as a community — albeit one that may now be quite divided — and should not be underestimated.
Perhaps instead of investment debates, then, the Council’s policy could be seen as an opportunity to spark a dialogue about the future of a town; its history, contemporary values and future.