Newcastle Council has stunned the heavy industry on which the city was founded by announcing it will divest from fossil fuels.
Newcastle City Council on Tuesday voted 6-5 to change the way $270 million of ratepayer funds are invested.
The move will see the money invested in banks involved in "environmentally and socially responsible investments" and avoid those in "harmful activities", such as greenhouse gas pollution.
Currently, about 80 per cent of the $270 million investment portfolio is held in the big four banks, mostly through term deposits.
Federal Labor MP for Hunter Joel Fitzgibbon described the move as ‘‘astounding’’ and ‘‘misguided’’, Newcastle Herald reported.
‘‘Councils have to invest money wisely,’’ he said.
‘‘But it is amazing that a council with the largest coal port in the world would move to do all it can to undermine that industry.’’
Meanwhile, Federal Industry and Science Minister Ian Macfarlane said he was astounded at the council’s decision.
‘‘I’m absolutely bewildered that the Labor Party is not prepared to step up for the coal industry, to step up for tens of thousands of people, many who are loyal to the Labor Party and pay union fees,’’ he said.
‘‘I’m amazed the council would step away from jobs in Newcastle and the Hunter Valley – the major provider of jobs in the Hunter is the coal industry, it is the base economy and contributes directly and indirectly to the region.’’
Labor councillor Declan Clausen, who moved the motion after winning a by election this year, said the policy meant that when the council had two funds offering the same rate interest, conditions and credit rating, it would choose the one with the best environmental record.
"Every time they come up for review, we will be moving money away from [the big four]. All else being equal, we are going to choose the greenest option," the Labor councillor said.
"There have been plenty of times when the big four banks are less competitive than what other institutions can offer."
A recent NSW Minerals Council survey shows mining's direct spend in the City of Newcastle council was $1.8 billion as at June last year, which includes $160.5 million in salaries (1118 local jobs) and $1.64 billion in direct community and business purchasing.
For the wider Hunter region, the mining industry spent $5.9 billion, including $1.5 billion in salaries (11,078 local jobs), and $4.4 billion in business purchases and contributions.
However Clausen denies the policy is sending the wrong message to the region’s coal industry.
‘‘It sends a message that council is keen to diversify the local economy. I believe our coal industry definitely has a future, but there is a bigger future in renewables.’’
Clausen said he hoped to eventually move the entire fund away from banks which invest in fossil fuels.
"Newcastle's economy has changed a fair bit. In the past we have obviously been very reliant on coal, but before that we were very reliant on steelworks," Clausen said.
"There are an increasing group of start-ups in Newcastle that are looking at a clean-tech future, we are embracing those opportunities. The coal downturn has particularly affected the Hunter Valley. Clean techs are going to be a significant employer moving forward. Council is being on the front foot about that."
Anti-coal activists 350.org Australia welcomed the council’s decision to divest from fossil fuels.
The Minerals Council of Australia said the policy has seen the council participate in a “pointless sham” driven by divestment activists.
The Australian divestment movement, pushed by 350.org, has experienced a groundswell of support since its inception 18 months ago, with $400 million worth of loans shifted from the big four banks to financial institutions without fossil fuel investments.
350.org campaign director Charlie Wood said nearly 200 organisations, local governments and individuals representing $50 billion in assets had pledged to divest from fossil fuels.
Various universities have been implicated in the divestment movement, including Sydney University recently.