Time for government investments to go green

Governments across the country – federal, state and territory – are pretty keen to spruik their green credentials these days. But how do they go putting their money (or rather, our money) where their mouths are?

That’s one of the questions underpinning a new piece of research released today by the Australian Conservation Foundation.

The Responsible Public Investment in Australia study looks at the really big buckets of money (anything over $50 million) controlled by governments and asks: (1) Do these major government funds take environmental issues into account when they choose which companies they invest in? and (2) Are governments’ investments consistent with their climate change policies? The short answer to both those questions is “not really”.

The 36 federal, state and territory investment funds examined in the study control assets worth $206 billion. They’re big. And they have serious financial muscle.

Those billions can be invested in, for example, companies that build new coal fired power stations, construct new freeways or mine uranium. Or they can be invested in companies that develop renewable energy projects, build urban public transport and regional rail infrastructure or turn landfill waste into electricity.

So what are our governments sinking our money into? This study finds government-controlled funds invest $47 in fossil fuels and uranium for every $1 they put into renewable energy.

Federal, state and territory investments in the private energy sector looked something like this in 2005-06:

At a time when governments are well aware of the urgency of climate change and economist Ross Garnaut has suggested emissions cuts of 80–90% might be needed by 2050, how is it that all Australian jurisdictions continue to invest so heavily in fossil fuel intense industries?

And how is it that all jurisdictions have relatively minor holdings in proven renewable energies like wind and solar and promising technologies like geothermal and tidal energy?

This report shows many large, government-run funds’ investment decisions are out of step with their government’s ambitions to reduce emissions and tackle climate change.

Some are heading in the right direction. The ACT Government has conducted a whole-of-government review of responsible investment practices. The Victorian Funds Management Corporation (the state’s largest government funds manager) and the massive Queensland Investment Corporation have both recently endorsed the United Nations’ Principles for Responsible Investment.

But the biggest federal fund of them all, the Future Fund, with $59.6 billion under its control, does not appear to have incorporated environmental, social and good governance principles into its investment decision-making. It should.

There are sound economic reasons for all governments to review their guidelines for investment funds to make sure they invest in socially and environmentally responsible companies. Funds that don’t consider climate and environment risks in their investment portfolios jeopardise their financial returns.

And, of course, they jeopardise the quality of the environment the next generation will inherit from us.