Contributor, Fergus Pitt, writes a follow-up piece based-on research highlighted in last week’s OnImpact feature article.
The last fortnight has seen two important news items that could make committed impact investors jolt upright.
- Santos is being sued by the activist shareholder group, The Australasian Center for Corporate Responsibility (ACCR). ACCR says Santos is misleading its shareholders by claiming to be committed to ‘net zero’ emissions by 2040, despite the impact of Santos’ massive natural gas business. [1]
- An investor in the Commonwealth Bank of Australia is suing the bank to release internal documents showing how it assessed lending and arranging for fossil fuel-related assets and projects against the bank’s publicised environmental and social policies. [2]
These cases are both about greenwashing: At issue is whether CBA’s and Santos’ public claims of environmental responsibility are reflected in the reality of how they run their businesses.
And, these events also introduce a new generation of ‘Innovative Activist’ organisations, that are financially and legally sophisticated organisations, and who are taking a step up in impact, and the importance they place on climate action. They may be aligned in purpose with activist groups like Extinction Rebellion, 350.org, or Greenpeace, but what’s new is how closely these organisations’ skill sets overlap with the executives running the companies they target. They have a firm grasp of highly technical business governance concepts, and are pulling those levers as hard as they can.
As OnImpact recently covered, some ethical and impact investors are now complementing their for-profit investment portfolio with support for political action. That reflects, I believe, an understanding that the urgency of climate and social action cannot be fully met with for-profit impact investing. Under that scenario, government and mainstream business policies and practices need to change, so that *all* investment flows can shift away from harmful activities, and towards projects and companies that are truly environmentally and socially sustainable. This means focussing capital on systemic change, alongside direct impact.
For impact-oriented investors, who are just getting familiar with the this group of organisations, those who are driving towards a deeper form of systemic change, it’s worth surveying the landscape.
By my count, there are nine particular organisations that exemplify this moment.
- Australasian Centre For Corporate Responsibility (ACCR)
Shareholder activists for climate and society - Beyond Zero Emissions
Combined think tank and action tank supporting a transition to Net-Zero - Environmental Defenders Office (EDO)
Public interest lawyers who have worked in climate and financial risk cases - Environmental Justice Australia (EJA)
An integrated legal and campaigning centre - Equity Generation Lawyers
For-profit law firm that has run effective and high-profile climate law cases - The Grata Fund
For-purpose litigation funding and campaigning - Market Forces
Finance and environmental research & campaigning - The Sunrise Project
Strategic grant makers and organisers for climate justice - Tobacco Free Portfolios
Pioneering divestment campaigner, focussed on tobacco.
Some of these organisations are very new, like Grata and Equity Generation Lawyers. And some, like ACCR, EDO and EJA have transformed themselves in recent years. As a group, however, they appear to be experiencing some common trends.
Short on Resources, Big on Impact
Their budgets and teams are growing fast. In many cases their revenue is doubling at least, according to their most recently filed statements and my interviews with their executives. A typical annual budget for this group was $2m-$5m last year. To put this in context their operating budgets are much smaller than Australia’s biggest not-for-profits, like Beyond Blue ($78.8m) or Fred Hollows Foundation ($96m). None the less, the Australian charities commission categorises any charity with revenue over $1m as “large”, and most of their executives say their next set of financial statements will show big revenue increases.
That growth reflects two things: firstly more and more people are convinced of the urgency of climate action and social inclusion, and make donations accordingly. Secondly, these organisations have good stories to tell, both in terms of their impact, and in terms of the innovation, creativity and intelligence of their work. That’s appealing to people who have been successful in life, and are in a position to provide financial support.
Their Public Profile
Mainstream and influential media are paying attention to their work. They often feature in the pages of The AFR, The New York Times and the Financial Review, not to mention the Fairfax/Nine dailies. Although media attention itself doesn’t protect the environment or make a society more inclusive, it is a channel to influence decision makers, build awareness from potential donors, and positive sentiment from talented people who might volunteer or join their staff.
Their Impact
Dollar for dollar, this group of organisations has an exceptionally strong impact record. Each of them can point to specific wins, but here’s a sample:
- Market Forces’ was behind campaigns that coincided with climate investment policy changes at banks, insurance companies, superannuation funds, including HSBC, the ‘big-four’ banks and HESTA.
- Beyond Zero’s contribution to large-scale just-transition plans and action in the Hunter Valley and Northern Territory.
- Grata helping to establish a right of habitable housing for 65,000 people in the NT, leading to compensation and dwelling repairs in the Santa Teresa community near Alice Springs, and a new legal playbook for all 67 remote communities.
- The McVeigh Vs REST case run by Equity Generation Lawyers, appears to have changed the climate investment policy at REST, and garnered the attention of trustees in other super funds.
But, this is a fast-moving area, and both sides of this struggle are adapting. Some climate and social laggards are spending large amounts on spin, obfuscation and legal protection, rather than addressing the underlying transition risks in their business.
A well connected strategist in this group, Sam LaRocca of The Sunrise Project, says “We have won the war on whether climate change is happening and requires action.”
But Sam also points to the sizable gap between stated political and corporate climate policies, public pledges and a credible trajectory for net zero by 2050.
“Now that the private sector is recognising the threat climate change poses to their businesses, they must take action to reduce their emissions directly, but it’s also crucial the private sector advocates to government for the systemic public policy shifts that will enable all of us to move faster and more effectively.”
Fergus Pitt is a communications strategist and writer specialising in sustainable finance and climate action. His recent report on the innovative activists of finance and law identifies the trends, opportunities and threats for this cohort, and includes a profile of each one. He can be contacted via LinkedIn.
[1] There are more elements to this case, including Santos’ overreliance on carbon capture and storage, which appears likely to miss targets. To get the details, visit ACCR’s announcement
[2] Some of the nuances of the case can be read in Equity Generation Lawyers’ explanation. The potential implications were covered by The Australian Financial Review.