The divestment of interest in seven resource companies by the Australian National University ruffled more than a few industry feathers in late 2014, but why were these companies targeted?
Divestment has become an anti-fossil fuel buzzword. It's regarded by green activists as one of the key strategies to halt the progress of the coal and petroleum industries, but is its effect any more than symbolic? What happens when a national institution tries to make a public stand?
The most recent Australian divestment saga took off in the media on October 3, when ANU vice chancellor Ian Young made an announcement that would rock the resources community; that the university would divest its stock interests in seven mining and resource companies.
"We should not invest in companies that cause social harm," Young said at the time, adding that the companies in question were "not socially responsible and doing harm".
To anyone who knew about those companies, it was an utterly bizarre statement, and one which threw the media into confusion.
The achievement of persuading the ANU to divest from companies that profit from fossil fuel was regarded as a great success by the student collective Fossil Free ANU (FFANU), however of the companies divested only two fell into that category: Santos and Oil Search.
The other five companies were mineral sands miner Iluka Resources, gold miner Sandfire Resources, nickel explorer Sirius Resources, nickel and gold miner Independence Group, and Australia's largest gold producer Newcrest Mining.
In July ANU enlisted the aid of CAER (Centre for Australian Ethical Research), an investment consultancy which assists in determining the ESG (Environmental, Social, Governance) rating of stockmarket-listed companies so that investors can be assured their decisions are 'responsible', such as avoiding investment in companies which assist or are involved in the production of tobacco, military hardware, or other socially 'irresponsible' businesses.
CAER is part of a global re-search network co-ordinated by the UK-based organisation EIRIS, which provides responsible investment advice and has been in business for 30 years.
Australian Mining spoke with CAER chief executive Duncan Paterson, to ask about the methodology that led to the selection and divestment of the aggrieved companies.
"We didn't use particular criteria for that decision," Paterson said.
"We don't generally comment on the specific criteria that apply to different companies, it's unfair to the companies involved."
However, Paterson did clarify that ANU simply subscribes to the general research service provided by CAER.
"One of the key pieces of misinformation out there about the ANU decision is that the research was in some way tailored or commissioned to assess those companies, that's not the way we do things," Paterson said.
"There are a number of different criteria: we look at something like 150 different criteria areas for companies, investors will come to us and ask us questions about a range of different sorts of things they're interested in, and sometimes investors will buy an off-the-shelf rating system.
"Ian Young is on the record talking about how the ANU purchased our off the shelf ESG rating system."
Patterson was careful to point out that CAER itself is impartial to the ESG needs of investors, and does not "blacklist" companies, as was described by Australian Financial Review.
"We are in no way an activist organisation seeking to attack companies," he said.
"We are a non-partisan and independent organisation – we do not publish blacklists, we do not advocate for divestment."
Paterson stressed that CAER has been providing ESG research services to investment clients in Australia for over a decade, with a range of clients investing in different sectors.
"All of our clients have different sorts of motivations, ranging from ethical investors who might want to avoid gaming and tobacco, through to mainstream ESG integration investors who are seeking to efficiently incorporate ESG factors into their portfolio management," he said.
Iluka Resources general man-ager (for investor and external relations) Dr. Rob Porter said representatives of the company met with CAER to discuss their process of evaluation.
"They have a lot of different criteria," Porter said.
"If you're involved in mining activities you don't rate very well to start off with because it's an extractive activity."
Porter said CAER had a number of criteria that would be difficult for most small mining companies to meet.
"They have criteria like: 'Do you have a dedicated manager who is responsible for water management?' or 'Do you have a dedicated senior manager for CO2 or emissions'," Porter said.
"We are not a large company by any matter of means, so no, we don't have dedicated people associated with that.
"We are, in a very preliminary way, involved in overseas jurisdictions, but we're not seen to have an adequate enunciation of policies around human rights abuses and child labour."
The ANU divestment, if not about fossil fuel, was supposed to be a decision made on the basis of sustainability and responsible business practices, but a closer look at some of the companies revealed a strong pattern of positive contributions to community, good environmental management, and sustainable practices.
Environment, Society, Governance
Iluka Resources announced earlier in October that it was confident in its sustainability credentials, that it operated within the framework of ASX corporate governance principles, and that it had a commitment to the highest standards of health, safety and environmental performance.
The company also has a documented track record of responsible rehabilitation of areas disturbed by exploration and mining operations.
In May this year Iluka Resources won the South Australian Premier's Award for Environmental Excellence, for research partnerships to promote industry best practice at the Jacinth-Ambrosia mineral sands operation.
Iluka was also recognised in September for outstanding contributions on the part of Narngulu operations manager Stuart Forrester, for promoting the role of women in mining, and in 2013 won the Excellence in Social Inclusion award for indigenous employment, education and business development in South Australia.
Sirius Resources managing director Mark Bennett is closely affiliated with Indigenous Services Australia director Tony Shaw, who has praised the nickel explorer for carrying out best practice engagement with the Nagadju people in negotiating for land usage for the Nova Nickel Project, near the Fraser Range in WA.
Bennett has been scheduled to join Shaw, a member of the Stolen Generation, on a cultural diversity speaking tour with workshop events to help other companies learn how to engage with traditional landholders with respect and sensitivity.
Oil Search, an exploration company with 85 years of history in Papua New Guinea, has strong involvement in community health programs, and is also a signatory to the UN Global Compact.
Oil Search told Australian Mining: "While we respect the right of any investor to sell its shares, this divestment was supposedly based on the assertion that Oil Search is 'socially irresponsible'. In our opinion, the research to support this conclusion was conducted without rigour, transparency in methodology, or consistency in application across the sector."
"ANU did not bother to confirm or consult with Oil Search before making the decision to divest. If it had, it would have seen that Oil Search operates globally recognised social and community programmes in PNG and is one of the leaders is the field of public health, being a principal recipient of funding from the UN's Global Fund to deliver health programmes in PNG.
"Companies are held to high standards of governance and disclosure. So should the organisations which publicly criticise them."
Sandfire Resources has an independently certified environmental management system which includes development of environmental standards and pro-active management aimed at minimising the company's footprint.
Santos has a lengthy history of community involvement and contributions, and was the largest company of those divested.
However, Santos was the only company to receive a written apology from ANU chancellor (and former foreign minister) Gareth Evans, who said the gas energy produced by Santos was "contributing to the social good".
A win for the students?
By campaigning on ANU campus, FFANU managed to garner support from 82 per cent of students, with substantial support from staff as well.
FFANU spokesperson Tom Swann, a student studying for a Masters of Climate Change Policies and Economics, said there was a level of disappointment in the companies chosen for divestment by ANU.
"I think it's interesting to see the sort of accusation that we somehow co-opted the university administration," he said.
"We had to fight an incredibly difficult fight to get them to pay attention to us, and in the end they haven't really done what we asked for either."
According to the ANU Environment Collective, top fossil fuel producers currently in the ANU investment portfolio include BHP Billiton, Rio Tinto, Wesfarmers, and Woodside Petroleum, as well as fossil fuel industry service providers Mermaid Marine and WorleyParsons.
What was achieved?
In the wake of the decision, ANU chancellor Gareth Evans sent a letter of apology to Santos chief David Knox, one which expressed deep regret in "any embarrassment suffered by Santos over the decision to divest interests in the gas producer".
Evans wrote that although Santos was a contributor to so-cial harm caused by CO2 emis-sions, ANU accepted that "the energy produced by Santos powers needed utilities and industries – contributing to the social good".
"The council will, of course, review its decision if it is persuaded that there are flaws in the methodology used by ANU's consultants, CAER, to rank companies or if there are inaccuracies in the information relied on by CAER," Evans wrote.
"Neither I nor the vice-chancellor nor any other ANU council member to my knowledge has described Santos specifically as a 'socially irresponsible' company.
"We are aware of the many positive contributions that your company, and some others from which we are divesting, have made to Australian society."
This confusing retraction (which did not, by the way, lead to reinvestment) threw into doubt any claim FFANU could lay on having influenced the decision to divest.
It was very clear that the decision had nothing to do with fossil fuel divestment.
That was the only impression one could take from ANU vice-chancellor Ian Young, who said in a Fairfax op-ed 'Time to move to a post-carbon world' that the "extraordinary" response to the decision to divest was because it was interpreted as "another domino in the divestment-movement effect, involving individuals and institutions deciding to sell their holdings in fossil fuel-producing companies".
It is worth noting that the period leading up to the ANU announcement saw a massive plunge on the ASX 300, during which none of the divested companies were able to escape unharmed.
Each of the seven companies took a hit during September, reaching troughs shortly after the ANU announcement.
Losses on share prices for each company between September 1 and October 3 ranged from 50 cents for Independence Group, up to $1.40 for Santos.
ANU has not commented on whether this contributed to their decision.
Iluka's Rob Porter said the company did not intend to pursue the matter through legal channels.
"Like other companies we're not particularly impressed with the quality of the rigour of the research, nor the fact that there was no real dialogue with the company in terms of being cross-checked, or having it reviewed independently," Porter explained.
"But rather than get into a brawl about this matter we'll engage with them and do what we can to change the assessment."
However, Sandfire Resources CEO Karl Simich took affront to the divestment of his company by ANU, but more so at the profiling conducted by CAER, and recently followed through with his threat to take legal action over the issue.
"CAER has not ascertained the facts, resulting in a mislead-ing profile on Sandfire which would in turn appear to have led to ANU's unfortunate public comments and actions," Simich said.
These legal proceedings alleging "misleading or deceptive conduct" were launched against CAER, but not the ANU, on Nov-ember 13.
On October 10 Sandfire described the profile about them which was supplied by CAER to ANU, and said: "The profile criticises the Company in relation to a host of stakeholder management issues."
"In one of its more startling and inaccurate criticisms, the profile states that Sandfire operates in a major nuclear area and is involved in the nuclear power industry," Sandfire said.
"Sandfire has one copper-gold operating asset 120km from Meekatharra in Western Australia and neither it or any of its joint venture partners are exploring for uranium."
An announcement made by Sandfire to the ASX in November said they had sought the retraction of two press releases dated 19 and 20 October, from CAER and its UK-based research partner, EIRIS.
The release from EIRIS on October 19 said research into the companies was based on publically available information, and that the research provided to ANU remained "a fair assessment¬ of how things stood before the controversy".
"Following the extraordinary level of media attention a number of companies have now committed to provide CAER with further information. This is a welcome development," EIRIS said.
"However reports that CAER will 're-write' their research seriously misrepresent the situation."
The press release from CAER on October 20 said they would not rewrite the research provided to the ANU.
"The media releases relate to corporate profiles prepared by CAER which purported to analyse the environmental, social and governance practices of certain companies including Sandfire," the miner said.
Sandfire said they were unsuccessful in persuading CAER and EIRIS to issue a formal retraction, however CAER said they had removed the press releases from their website soon after the request was made.
Sandfire has contended that CAER did not conduct their re-search in accordance with EIRIS research processes, which refers to engaging in "focused dialogue" with companies on the basis of targeted questionnaires.
CAER said that each of the seven companies had their information updated in the past 12 months, however Sandfire said they had not received a targeted questionnaire in that period, and were not given opportunity to address any of the issues raised in their CAER profile.
"CAER has not ascertained the facts, resulting in a misleading profile on Sandfire which would in turn appear to have led to ANU's unfortunate public comments and actions."
Australian Mining understands that the action filed by Sandfire against CAER seeks a formal retraction of the statements issued by CAER in October, as well as amendments to their company profile, plus costs.
If successful, Sandfire's case will certainly cause further stir in the investment profiling industry and review of research practices, but regardless of the outcome mining companies will be more conscious of the need for up to date reporting, and maintaining ongoing dialogue with companies such as CAER that keep company profiles on record for investor reference.
In the end, it would seem that more trouble than good has been caused by ANU's decision; not in that they decided to divest from these companies, but that they did so publically, with a statement written in potentially libellous, broad strokes about the companies' participation in irresponsible "social harm", without any further justification for their assessment than to point at CAER and then wash their hands of the whole affair.
Although whether this very convoluted affair will be the start of a divestment domino effect, as referred to by vice-chancellor Young, will remain to be seen.