Future Fund ignores activists to keep Adani Ports
The Future Fund has squared off against environmental activists over its $3.2m equity investment in Adani Ports, declaring it has no plans to divest the controversial holding while acknowledging the long-term risks of fossil fuel investments.
Appearing at a senate estimates hearing on Tuesday, Future Fund chief executive Raphael Arndt said Adani Ports and Special Economic Zones didn't meet any of the fund's exclusion criteria, despite its ties to the Myanmar military and its involvement in the Carmichael coal mine project.
"It's one $3m holding in a $12bn strategy, so it's a relatively small holding," Dr Arndt said.
"We have a fairly well defined exclusions policy, which is limited to exposures that are either illegal in Australia, breach a treaty Australia has signed, or tobacco manufacturing. In this particular case Adani doesn't fall into any of those categories so we have no plans to divest."
The $171bn sovereign wealth fund came under attack late last year when its holding in Adani Ports was made public.
It acquired its Adani Ports holding in 2011 as part of a broader emerging markets strategy aimed at diversifying its geographical risk.
The investment was made through a passive emerging market equities holding with State Street Global Investments, with the Future Fund giving no explicit instruction to put funds into Adani specifically.
A day after reports emerged that PIMCO, one of the world's largest asset managers, would no longer participate in Adani Ports bond offerings because of its links to the coal project, Dr Arndt told the hearing the fund would not be dumping its fossil fuel holdings.
"We've discussed the risks we see in fossil fuel investment and future carbon pricing and policy changes, and our approach continues to be that we integrate consideration of those into our investment decision making," he said.
"In this case we don't see any reason to change the process that's been adopted."
Excluding fossil fuel exposures purely because they're fossil fuels would not be consistent with the fund's mandate to maximise returns over the long term without taking excessive risks, he added.
Commenting on the Future Fund's exclusions policy, Dr Arndt said the board generally tried to avoid them.
"This is one example of a company that has activities in and around energy industry in the fossil fuel areas," he said of Adani.
"We're tracking the conversation, and we do see that as a long-term risk that needs to be understood and managed. But we're much more concerned about the whole portfolio exposure rather than individual companies."
The fund engages with energy companies that it has significant holdings in to discuss their approach, he said.
The Future Fund has spoken to State Street about the Adani holding, Dr Arndt confirmed.
"We raised the issues with them and asked that they consider them as part of their process.
"We pointed out to them the broad range of activities of this company and outlined our broad range of principles and asked them to take that into account."
Powering Australian Renewables, in which the Future Fund holds a 40 per cent stake, alongside Mercury New Zealand, earlier this month agreed to buy wind farm operator Tilt Renewables in a deal valued at more than $2bn.
Dr Arndt said the acquisition would increase the fund's exposure to renewable energy to $1bn.
Originally published as Future Fund ignores activists to keep Adani Ports