On 15 July the Bass Coast Shire Council passed the following motion: “In recognition of Council’s commitment to minimise support for fossil fuel developments, the Funds Investment Policy be modified to reflect: a. That Council officers will prioritise investments in environmentally and socially responsible financial institutions if the investment is compliant with investment policy objectives and parameters and the rate of return is favourable in comparison to other investments available at the time; b. The mechanism for reporting on Council’s term investments is through the Quarterly Financial Report 3. The community be informed of the changes to the Funds Investment Policy. ”
The Bass Coast Shire divestment plan has been some time in the making and as such is a work in progress. At an ordinary shire meeting 9 December last year a question was asked from the public gallery by Bernie McComb on whether the shire would divest from financial institutions that supported fossil fuel development. The immediate reply was that a list of Council investments was published quarterly by Bass Coast and were available for public scrutiny. In June 2016 the Bass Coast Shire produced a ‘Strategy for Ethical Investing’ with particular reference to divesting or removing financial support for the fossil fuel industry. As on other matters Bass Coast seems to be leading the way.
The conflict between each council’s (and any other investor) financial aims becomes apparent. Do they maximise their returns by depositing their funds in high interest earning deposits or do they accept a much lower earning rate with a secure institution? But the choice may not even be as clear as that. Many councils lost money invested in what was thought were secure and recommended investments during the global financial crisis (GFC). Gosford Council (NSW) recently announced a loss of over $19 million in Collateralized Debt Obligations – part of the subprime mortgage fiasco during the GFC in the US. These investments were promoted by some leading investment advisers as secure.
The problem today of climate change and investment in the fossil fuel industry is overwhelming. Our banks (and other large Investment institutions) and our politicians are invariably slow to react to these threats. All our major banks have considerable to large investments in the fossil fuel industry. And yet coal mines once valued in the hundreds of million dollars have recently changed hands for a single dollar. That is an example of a ‘stranded asset’ – where the value of the investment plunges so quickly the investor is unable to remove it quickly enough and thus loses all or a major part of their money.
The risk to these ‘safe investments’ is enormous and the political implications are diabolical. Investments should not only be safe but also sustainable. What is your shire doing on this matter?