Dr Andrew Forrest, AKA Twiggy, is a well-known Australian industrialist, he’s Chairman of Fortescue Metals, and he’s a philanthropist. But with a new honorific (he’s now a Dr.) and with some high profile research and investments into renewable power and sustainable agriculture, Twiggy is starting to talk about more than just tonnes of iron ore shipped, he’s starting to talk about his impact. 

A most recent investment is his reported allocation to Breakthrough Energy Ventures, a venture capital fund founded by Bill Gates. It’s focussed on accelerating innovation in renewable energy technology in order to reduce greenhouse emissions and combat climate change. The fund was launched in 2015 with a who’s-who of global billionaires as investors, they included: Jeff Bezos, Jack Ma, Richard Branson, and Michael Bloomberg.

The investment came from Forrest’s family office, Tattarang, and is part of a growing portfolio of projects with positive impacts. It includes a stake in Harvest Road Oceans, which is reducing the carbon emissions and environmental impact of its beef and cattle production business, while its aquaculture brand, Leeuwin Coast, now produces Australia’s first certified carbon neutral shellfish.

Tattarang is also focussing on renewable energy, at scale. Through its control of Squadron Energy, it was co-lead investor into the Sun Cable capital raise, alongside Mike Cannon-Brooks and Grok Ventures.

Of course when it comes to an empire as vast as that of Andrew Forrest, these investments can’t be viewed in isolation. The environmental footprint of Fortescue Metals stretches back many years, and far across the planet. But that company is also playing its part in this dynastic pivot towards the renewable energy transition. So let’s delve a little deeper into the impact of Dr Forrest. 

Twiggy the Philanthro-capitalist

Minderoo Foundation is the philanthropic arm of the family’s operations. It was setup by Dr Forrest and his wife Nicola Forrest in 2001. The foundation has a corpus of $2 billion which it uses to fund a range of projects, including arts and community building, ocean health, ocean plastics, fire and flood resilience, and indigenous opportunity through employment parity. 

It issues grants and funds research, but Minderoo also makes investments. According to its 2020 annual report: “Minderoo Foundation’s philanthropic initiatives are supported by our portfolio of assets. We actively manage this diversified portfolio with the responsibility of sustaining our philanthropic activities, as well as in harnessing the potential for impact through investment.”

The foundation owns a material stake in Fortescue Metals, with dividends offering a rich source of annual income. And the annual report explains that it’s listed investments include an ESG screen; “to ensure our investments are in line with the ethos of the Foundation.”

And in February 2020 the Foundation launched a Strategic Investment Fund, seeded with $100 million from the corpus; “This capital will be invested directly into opportunities that increase the magnitude of our impact or accelerate our pursuits towards an impact outcome.” as outlined by the Minderoo annual report. But it doesn’t offer any specifics about where investments were made.

The Minderoo Foundation is described as a ‘modern’ philanthropic organisation, and the breadth and positive impacts of its charitable projects is huge. So there is huge potential for this same ethos to be translated to its investments.

The Impact of Fortescue 

Fortescue Metals is an iron ore miner, which is the key component in steel. And of course the traditional steel-making process is hugely carbon intensive, not only through the energy required, but also through the use of metallurgical coke within the blast furnace. So the obvious question arises, are the positive impacts of this West Australian mining empire outweighed by the potential negative ones?

Well, the traditional methods at Fortescue are changing, and that offers huge potential to shift the scales towards positive impacts on the environment. Fortescue has spun-out a company called Fortescue Future Industries, and it’s making progress in finding ways to manufacture ‘green steel’. 

Beyond making green steel, the firm is also focussed on the potential of hydrogen as a clean, green fuel. Traditionally the production of hydrogen has been carbon intensive, but if a large enough source of renewable energy can be secured, this can be harnessed to produce green hydrogen. This becomes a mobile source of energy, and it can be adapted for use in industrial-scale gas-powered equipment.

The group has announced plans to build a green hydrogen plant in Bell Bay in Tasmania. It has the capacity to be one of the world’s largest green hydrogen plants, powered entirely by Tasmanian renewable energy.

And farther afield, the group has recently won the rights to develop the huge Grand Inga hydropower project in the Democratic Republic of Congo (DRC). Along with a series of dams, it has the potential to be one of the world’s largest hydro-electricity projects in the world. And for Fortescue, this is an ideal source of power to become a leading producer of green hydrogen, for their own use, and for a hungry market in Europe. 

There are risks of course, the DRC is a poor country that’s been ravaged by war and has a miserable human rights record. But it’s hoped that with Fortescue as the lead project developer, that social issues around sourcing of local labor, safe working conditions, and combating gender-based violence will be key considerations. 

It can be difficult to move beyond one’s cynicism about the true intentions of industries with high emissions and a history of poor environmental protection. But of course, it is through the actions of these companies that offers the most potential to make a material reduction in the emissions intensity of our economy. 

Investors like Melior aren’t shying away from this challenge; 

“Tackling emissions reduction in hard to abate sectors such as steel and cement is vital if we are to transition to a low carbon economy. Fortescue is playing a leadership role in developing renewable energy solutions through its allocation of 10% of its annual profit to green hydrogen, green ammonia and green iron ore technology.” Says Lucy Steed, CEO at Melior.

Big Industry has the Potential for Big Impact

It’s an exciting time to be involved in impact investing. A critical mass of demand for businesses to measure their impact has pushed all investors to begin to account for a whole range of negative externalities. 

Andrew Forrest built his wealth on the back of an industry that has a very poor environmental record, but there are signs that market forces are leading Fortescue Metals to shift their focus, and invest in new, cleaner ways of doing business.

Is Andrew Forrest an impact investor? I think that depends who you ask, but with a deeper emphasis on measuring and reporting the impacts of his operations, both positive and negative, then I would argue that he would not only gain deeper insights into his processes and costs, but he would earn the respect and loyalty of a new generation of investors who want ‘impact’ added to the traditional risk/return paradigm. 

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