ACSI backs Westpac’s decision on Adani coal

ACSI chief Louise Davidson says investment decisions based on environmental and social factors are “hard-headed’’.

Australian Council of Superannuation Investors chief executive Louise Davidson.

The Australian Council of Superannuation Investors has backed moves by top companies to make controversial investment decisions based on environmental and social factors, in the wake of criticism heaped on Westpac for ruling out funding Queensland coal projects.

ACSI chief executive Louise Davidson said decisions such as those taken by Westpac, which drew criticism from Prime Minister Malcolm Turnbull and Resources Minister Matt Canavan, were not “feel good’’ decisions but rather were motivated by “hard-headed thinking’’.

“That social licence to operate issue, the broad overarching ability of business to maintain the faith of the community in which they operate, I think will be a really big issue for the future,’’ she told The Australian ahead of ACSI’s annual conference in Melbourne today.

“Some pretty hard-headed thinking goes into these decisions. I would characterise them as being motivated by common sense rather than by being simply seen to be the good guys.’’

Westpac ruled out supporting Indian coal giant Adani’s proposed coalmine and others in the Galilee Basin of Queensland under its new climate change action plan announced on Friday, which was criticised as anti-development by Mr Canavan. He also labelled the bank executives as “wimps’’.

The Westpac move came after AMP Capital announced in March that it would dump almost $600 million worth of investments in big tobacco, cluster munitions and landmines because they were no longer compatible with the group’s ethical investment framework.

Experts described it as the largest ethically driven divestment of stocks in Australian corporate history as pension funds around the world, including Australian superannuation funds, come under mounting pressure to consider the environmental and social impact of their investment decisions.

A recent Mercer survey of global equities showed that of the 127 global funds sold in Australia, only five were classed as using socially responsible investing principles. Of the 157 funds in the survey that invest in Australia equities, only 13 used SRI principles.

ACSI’s board members include representatives of industry funds Cbus, HESTA, Hostplus, Local Government Super, QSuper and State Super.

Ms Davidson said there was a growing body of evidence that sustainable investing contributed to the bottom line of companies and returns to shareholders.

“I am confident that an organisation like Westpac will have done their numbers on this,’’ she said of the bank’s Adani move.

“Certainly there continues to be growing evidence that managing this risk in investment portfolios adds value.’’

She said investor activism was now evolving from super funds simply casting a vote at AGMs on executive remuneration to holding companies to account for the social and environmental impact of their decisions, both internally and externally.

“The age of active share ownership by institutional investors has arrived. We are seeing a much greater understanding of and acceptance of the fact that big super funds and pension funds have a responsibility to be stewarding their capital to be responsible investors in the assets they are investing,’’ she said.

BHP Billiton has come under attack over the past month from activist shareholder Elliott Management, which is pushing a plan to dissolve the mining giant’s dual-listed structure for a London primary listing, float its US petroleum ­assets and return more money to shareholders.

Elliott put forward an restructure proposal and revealed it had bought more than $1 billion of BHP’s London shares. BHP issued a rebuttal of the proposal.