Australia revitalizes efforts around climate action but were they ever a contributor to climate action to begin with? Their latest proclamation prompted us to take a look at what progress has been made by Australian companies on this front.

Sam Leavitt
September 21, 2022

ESG Spotlight: Australia a Key Climate Player? FMG, AGL, and BHP Tell the Story

ESG Spotlight:  Australia a Key Climate Player? FMG, AGL, and BHP Tell the Story

Australian Energy Minister Chris Bowen boldly announced to the world that “Australia is back” in terms of the fight against climate change, but were they ever at the table to begin with? Notably at COP26 in Glasgow last year the country took the stance of not legislating climate action, opting for private interests to take the lead. Earlier this month Australia did finally pass climate related legislation, prompting our analysis on Australian companies using our ESG Safeguard platform. We specifically focused on companies involved in emerging climate related technologies in the past year.

ESG Safeguard Platform: Australian Companies, ESG Outlook Past 365 Days

Fortescue Metals

This week Fortescue Metals (FMG:AU) announced that it would spend $9.2 Billion AUD on climate change initiatives, including hydrogen projects, to get to net-zero in Scope 1 and 2 emissions by 2030. The company announced the 2030 goal around Climate Week last year, and followed up that commitment with investments in hydrogen projects in Germany, Australia, and Argentina along with more exploratory projects in other countries like Djibouti.

While it may seem paradoxical that a company in a fossil fuel heavy industry like mining is taking a stance on climate change, the truth is that iron mining is still critical for construction and steel production, work that needs to be done to develop a more sustainable world. It actually makes the most sense for these companies to be innovating and using their profits from mining to drive real change on the renewables front, despite inactivity by the Australian government until recently. Under the leadership of CEO Andrew Forrest, Fortescue is set to become one of the premier hydrogen players, with projects spanning the globe. It will be interesting to see how the next wave of funding will be spent, but clearly based on the companies spending in the past year, hydrogen will be involved.

Additional Players

AGL Energy (AGL:AU) has been moving towards renewable energy, with their most recent projects being solar development for agribusiness. However, the company has been criticized for not doing enough to move away from coal in recent years. In 2016 AGL started the Powering Australia Renewables Fund and still owns a stake in it. The Renewables Fund has 1,000 MW of renewable energy in operation and development. Despite these efforts, it is estimated that AGLs coal burning stations contribute to as much as 8% of Australia’s total carbon emissions. Recently, billionaire activist and Atlassian founder Mike Cannon-Brookes acquired a stake in the company in order to push for climate change measures.

BHP Group (BHP:AU) is the primary partner in a new solar battery project by Alinta Energy expected to be online by 2024. This is part of the company's goal to reduce emissions 30% by 2030. The company has also been working with Caterpillar (CAT) to overhaul their mining fleet for zero-carbon emissions vehicles.

Room for Improvement

Fortescue seems to be leading the charge in what could be a green wave for Australia, but the reality is efforts of other companies in the country have been lukewarm when it comes to renewables, with other investment from companies outside the country like Iberdrola fueling progress.

Companies like AGL still have notable carbon footprints and more needs to be done, especially when it comes to phasing out coal fired assets. Australia may be back when it comes to climate change, but the nation's track record shows there is much room for improvement. Nevertheless, this an opportunity for Australia to show stronger leadership on climate change going forward.

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This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.

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