Many of us would look at the current state of Australian politics and put its dysfunction and delay down to politicians behaving badly or acting out of self-interest or ideology. However, in respect of the Australian climate and energy policy stalemate, the destructive role of lobby groups should not be underestimated.
When governments fail to implement a comprehensive climate and energy policy it exacerbates the climate risks faced by companies and society more broadly. Climate risks commonly fall into two categories – transition and physical risks. Transition risks are those driven by the need to reduce emissions across all sectors, but particularly in electricity, manufacturing and transport. In the absence of good policy, the transition in these sectors will be less orderly, thus making Australian companies susceptible to rapid and unpredictable change. In terms of physical risks, it is imperative that we adapt essential infrastructure and housing stocks to climate impacts. A failure to adapt presents risks to investors in infrastructure, property, and of course banks and insurers.
Lobbying by industry associations
The reasons companies join industry associations which lobby government are simple and are not fundamentally objectionable. Companies stand to benefit from influencing policy outcomes, be it through access to markets, government support for industry, or reduced regulation. Investors should be concerned, however, when a lobby group advocates for policy outcomes that are at odds with the stated position of a company, or are in contravention of a global accord, like the 2015 Paris Climate Agreement (in which countries, including Australia, made formal commitments to reduce carbon emissions over time).
Since the days of the Howard government, when a handful of groups self-described as the “greenhouse mafia”  delayed Australia’s commitment to the Kyoto Protocol, lobby groups have continued to stand in the way of sensible policy to reduce carbon emissions. While lobby groups representing the coal, oil and gas sectors have often been the most vocal, groups representing emissions-intensive industries and peak business lobby groups have also played a destructive, rather than a constructive role.
ACCR’s lobbying resolutions
In mid-2017, ACCR began engaging with BHP about its membership of industry associations that obstruct climate policy, both in Australia and abroad. Ultimately, ACCR filed a shareholder resolution with BHP asking the company to review its membership of industry associations, how those memberships were governed, and whether those associations’ advocacy on climate and energy policy was consistent with the views of BHP. While the substantive resolution garnered the support of just 9.1% of shareholders, BHP made a commitment to review its industry associations.
That review was ultimately published in December 2017  and BHP identified material differences on climate and energy policy from the Minerals Council of Australia (MCA), the US Chamber of Commerce and the World Coal Association. In the case of the MCA, BHP found that the Council had, at times, prioritised the affordability and reliability of electricity over emissions reductions and that it had advocated for coal-fired power ahead of other energy sources. BHP gave the MCA one year to improve its advocacy and it left the World Coal Association in April 2018 .
In the case of BHP, it was clear that the MCA had long advocated for policies that were materially different from those of the company. This was of concern to investors. Rarely have Australian companies been held responsible for the advocacy of their industry associations, and more rarely still have companies been pressured to leave an association because of the nature of that advocacy.
In 2018, ACCR continued its work on climate lobbying, meeting with scores of companies about their membership and governance of lobby groups including the Australian Petroleum Production and Exploration Association (APPEA), the Business Council of Australia (BCA), the Queensland Resources Council and of course, the MCA. ACCR filed shareholder resolutions at both Rio Tinto and Origin Energy, similar to the resolution filed with BHP. As ASA’s members will be aware, the support for these resolutions has grown exponentially in the last year:
Rio Tinto  subsequently reviewed its membership of industry associations, as did BlueScope Steel , while Origin Energy has yet to make a formal commitment. Toward the end of 2018, both NAB  and Westpac  agreed to review the role their industry associations have played on climate and energy policy.
Institutional investors too have become increasingly attuned to the role of industry associations in obstructing climate policy. In May 2018, the UN Principles for Responsible Investment (PRI) published a paper entitled ‘Converging on Climate Lobbying’ , which sought to educate investors about the role of lobby groups in shaping climate policy and how best they should tackle the problem. In October 2018, a coalition of European investors went further, publishing a set of principles entitled ‘European Investor Expectations on Corporate Lobbying on Climate Change’ . The coalition subsequently wrote to 55 European companies , calling for greater transparency of their industry associations’ advocacy on climate and energy policy.
This coalition of European investors has had an immediate effect. Bundled up with Royal Dutch Shell’s widely publicised commitment to reduce its carbon footprint by 50 per cent by 2050 was a formal commitment to review the role of its industry associations in lobbying on climate policy . It’s clear that institutional investors now understand the role of lobby groups and are escalating actions to restrain their influence on climate policy.
This article featured in the Australian Shareholders Association EQUITY magazine in April 2019
If you have any tip offs for the ACCR regarding lobbying please contact us at email@example.com
For more information about the negative influence of lobby groups on climate and energy policy in Australia follow Lobby Watch on Medium.
Resources for investors:
- Adam Matthews, Director of Ethics & Engagement at The Church of England Pensions Board – Why contradictory climate lobbying has to end https://blogs.thomsonreuters.com/sustainability/2018/11/13/executive-perspective-why-contradictory-climate-lobbying-has-to-end/
- IIGCC – Investor expectations on climate lobbying http://www.iigcc.org/files/publication-files/Investor_Expectations_Climate_Lobbying_Oct_2018.pdf
- UNPRI – Converging on climate lobbying https://www.unpri.org/Uploads/g/v/q/PRI_Converging_on_climate_lobbying.pdf
- AGL Energy https://www.2018sustainabilityreport.agl.com.au/stakeholders/stakeholder-advocacy
- BHP https://www.bhp.com/-/media/documents/ourapproach/operatingwithintegrity/industryassociations/171219_bhpindustryassociationreview.pdf?la=en
- Bluescope Steel https://s3-ap-southeast-2.amazonaws.com/bluescope-corporate-umbraco-media/media/2437/bluescope-and-industry-associations_september-2018.pdf
- Boral https://www.boral.com/sites/corporate/files/media/field_document/3602%20Boral%20Industry%20Assoc%20and%20Community%20Organisations%204.pdf
- Incitec Pivot https://www.incitecpivot.com.au/sustainability/ipl-online-sustainability-report/sustainability-report/memberships-of-associations
- Rio Tinto https://www.riotinto.com/documents/RT_Industry_Association_Disclosure.pdf
- Shell: https://www.shell.com/sustainability/transparency/public-advocacy-and-political-activity/_jcr_content/par/textimage.stream/1554193723004/0a46ab13e36e99f8762ebb021bd72decec2f47b2/final-industry-association-climate-review-april1-2019.pdf
- Glencore https://www.glencore.com/media-and-insights/news/Furthering-our-commitment-to-the-transition-to-a-low-carbon-economy
 Pearse, Guy, High and Dry, 2007
 Australian Financial Review, BHP formally leaves World Coal Association over climate change stance, 5 April 2018
 Financial Times, Investors challenge 55 companies over commitment to climate change, 28 October 2018