What does the ANU’s divestment decision mean for energy-focused stocks?

I was pleased to hear that my alma mater, the Australian National University, has once again proven that it is one of Australia’s leading universities, with regard it is committing to sell shares in seven fossil fuel companies deemed to fall short of increased Environmental, Social and Governance (ESG) standards.

In an article quoting multiple critics of the university’s decision, the Australian Financial Review forgot to mention that the call puts ANU in good company; for example Stanford University has already committed to divest from over 100 companies.

One of the reasons people might find the decision difficult is because we are not given all the reasoning for the ANU’s decision. Surprising as it may seem to some, the ANU isn’t obliged to explain to mining companies why it does not want to own them. Would you let a CEO bully you out of selling shares in his company?

I don’t necessarily agree with all of the companies selected. I think some of the smaller ones were probably left out because they aren’t spending the necessary resources on ESG disclosure. That’s an area they could improve on, if they wanted.

On the other hand, I do agree with the decision to divest Santos Limited (ASX: STO) due to the well documented controversy over the impact of their Coal Seam Gas operations. Indeed, the ANU has already agreed to divest from Metgasco Limited (ASX: MEL) which is currently taking the NSW government to court because the government withdrew permission for its unpopular plans.

While I don’t feel particularly passionate either way about Iluka Resources Limited (ASX: ILU), any informed shareholder would be aware that the company proposes to dump low level radioactive waste rather than return it to the mine as it had originally promised to do. I can understand why that might count against it.

I actually feel a bit sorry for Oil Search Limited  (ASX: OSH) because oil is a high impact business (making ESG compliance difficult) and the company is a cut above Santos in my mind. Perhaps it could improve its ranking with time. Shareholders will at least be comforted that the company didn’t waste its time complaining about the decision in the newspaper.

The other companies impacted are Sirius Resources Ltd (ASX: SIR)Sandfire Resources NL (ASX: SFR) and Independence Group NL (ASX: IGO). It’s hard to know what the environmental impact of these three junior minors is, because they don’t make a lot of information available. Here’s an idea out of left-field: rather than complaining to reporters, Sirius could focus on fixing the problem. After all, ANU still owns other mining company shares.

But the outrage award goes to Whitehaven Coal Limited (ASX: WHC) CEO Paul Flynn who has described fossil fuel divestment as “green imperialism at its worst.” I presume Al Gore is the Emperor.

Also amongst the imperialists are the majority of ANU staff and students who evidently agree with divestment campaigner Tom Swann’s argument that, “ANU is merely starting to do — very cautiously — what any leading university ought to do.”

A more realistic view on the divestment movement is offered by investment bank UBS in a recent report. “We highlight the fossil fuel disinvestment campaign as a potentially effective movement,” they wrote, “defined as one that will act as a catalyst for change.” 

As UBS points out, those agitating for change, “are the consumers, voters and leaders of the next several decades. In our view, this single fact carries more weight than any other data point on the planet for this issue: time, youthful energy and stamina are on the side of the fossil fuel divestment campaign.

We live in a society that respects property rights, and you are free to sell your shares in any company you want. No amount of outrage on behalf of the CEO will change that.

After all, the real problem with companies like Whitehaven Coal is that they lack long term tailwinds to drive profitability over the long term.

That's not a problem faced by this steadfast business which is very cheap, and combines valuable infrastructure with recurring revenue streams.

Insiders evidently agree with me, because a co-founder recently bought a large number of shares at within 3% of current prices.

This company has grown its dividends per share for nine years in a row, and I doubt the share price will stay this low for long, so just click on the link below, enter your email and discover this stock now, before it's too late.

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Motley Fool contributor Claude Walker (@claudedwalker) does not own shares in any of  the companies mentioned in this article.

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