Chairman Peter Coates says company’s plan is ‘consistent with good value’, but experts call it ‘a breathtaking failure to come to grips with a world in transition’
May 5, 2017 — The oil and gas company Santos has admitted its business plans are based on a climate change scenario of a 4°C rise n global temperatures, at odds with internationally agreed efforts.
Its chairman, Peter Coates, made the comments at an AGM in Adelaide on Thursday, telling shareholders it was “sensible” and “consistent with good value”.
Earlier this week, the Australian National University, which previously divested from Santos citing a commitment to its renewables research, appeared to have reinvested in the company.
There has been a shareholder push for a resolution that Santos disclose its climate risk assessments and scenario analyses.
Asked whether the analyses were conducted on a 2°C pathway, Coates replied that the company had adopted a 4°C pathway.
“It’s in comparison to the [International Energy Agency] business-as-usual forecast on carbon emissions,” Coates said.
“There’s been no nationally determined commitment to the 2°C scenario, and even the 4°C scenario is not funded. So I think what we’re doing is very sensible, and consistent with good value.”
Will Steffen, councillor with the Climate Council, and an emeritus professor at ANU, said Coates’s revelation was “absolutely appalling”.
“[A 4°C pathway] really is a worst-case scenario,” he told Guardian Australia. “This is not some minor climatic blip we need to deal with. It’s a completely different climate system.”
Steffen said the difference between the ice age and the Holocene age, which Earth has been in for about 12,000 years, was 4°C. “You’d be locking in tens of metres of sea-level rise, and you can forget about the world cities,” he said.
In 2015 Shell was accused of pursuing a business strategy based on 4°C warming, which experts have said would lead to catastrophic climate change, including a devastating impact on world food production and the finance market.
The Paris climate agreement, which came into effect late last year, sets a target of carbon emissions that would mean a global temperatures rise of no more than 2°C above pre-industrial levels.
There have already been warnings from UN agencies that current government pledges to cut emissions would only hold it to 3°C – well beyond what climate scientists consider the limit of safety.
Daniel Gocher, an analyst for Market Forces who attended the Santos meeting and pushed for the resolution, said Santos had breached the trust of its investors.
“Two degrees means they’re serious about climate change. That’s what governments around the world agreed to in Paris. Four degrees means business as usual and that means they’re not taking it seriously.”
Gocher said Santos had effectively displayed climate denialism, and “a breathtaking failure to come to grips with a world in transition”.
At the meeting Coates also said there was no gas shortage, but there was a “policy shortage”, and he accused the federal government of not showing commitment and support for the development of an ongoing supply to the east coast, the ABC reported.
The Australian National University has apparently bought back into Santos after controversially divesting its shares in 2014, Guardian Australia can reveal.
In October 2014 ANU divested from about $16m worth of shares in seven fossil fuel companies. The vice chancellor, Ian Young, said at the time the ANU was a major environment and alternative energy researcher and had to “be able to say that we’re confident that the sort of companies that we’re investing in are consistent with the broad themes that drive this university”.
The university was blasted by Coalition MPs and ministers, and in the media. Eighteen months later it also faced criticism from its own staff and students for not divesting the remaining estimated $45m it still had in the resource sector.
However according to ANU disclosures, it appears the university has since bought back into at least four of the seven companies.
A report on its 2016 investments, which totalled more than $326m, listed dozens of companies including Santos, Sandfire, Oil Search, and Newcrest Mining – all previously divested under its socially responsible investment policy, adopted in July 2013.
“As a result of that policy, we don’t invest in companies whose primary business is coal, gambling, tobacco or pornography, and we have taken steps to reduce the carbon intensity of our portfolio,” an ANU spokesman told Guardian Australia.
In October 2015 the university appointed an external portfolio manager. ANU’s website said it made no decision itself about stock selection, but had placed conditions on the manager’s decisions, including that investments:
- exclude companies that derive more than 20% of revenues from coal, gambling, tobacco or pornography;
- hold a portfolio with 25% less carbon intensity than the S&P/ASX 200;
- ensure that the portfolio demonstrates a 10% improvement in the overall environment, social, governance (ESG) rating relative to the benchmark.
“These conditions were imposed on the external manager to decrease the university’s investment exposure to CO2-intensive industries without increasing the university’s exposure to volatility in the equities market,” it said.
“If this balance was not managed, it might adversely impact the university’s financial stability, including its ability to meet obligations to pay superannuation liabilities.”
The spokesman said an April meeting of the ANU council decided to make the report public in the interest of transparency.
Matt Rogers of Fossil Free ANU welcomed the “step forward in disclosure” with the list’s publication, but criticised the reinvestment. “It fails to acknowledge the political dimensions of the issue and fails to hold fossil fuel companies accountable for their climate change obstructionism and blatant disregard for environment,” he said.
Gocher said ANU’s move was “strange”. “If they were going to get back into a fossil fuel company, Santos wouldn’t be it,” he said.
Tom Swann, a researcher at the Australia Institute, said there was some progress shown by ANU’s report, including the investment disclosure itself, a commitment to proxy voting which could lead to pressure on the university to vote for companies to avoid resource projects like Adani, and a big investment in a Victorian windfarm.
“I do think they’ve gone further than previously – but it is still concerning that they reinvested and didn’t tell anyone,” he told Guardian Australia. “I think there will be backlash. People on the ANU campus and the thousands that came out in support of them when they were being bullied will feel a bit betrayed by this.”
Swann said there was a “broader lesson” about ethical investing for universities.
“Clear policies, clear principles, and need to communicate really clearly about what you’re doing.”