Investor revolt rocks AGL as climate demands intensify

AGL, the nation’s heaviest greenhouse gas emitter, has been rocked by an unprecedented investor revolt over climate change as more than half of its shareholders backed demands for vastly stronger carbon-reduction goals.

In the latest push for polluters to reform their businesses and act on global warming, 55 per cent of AGL’s investors defied the board by supporting a motion for the energy giant to set “short-, medium- and long-term” decarbonisation targets in line with the Paris Agreement’s aspirations to keep global warming below 2 degrees.

AGL’s power plants account for an estimated 8 per cent of Australia’s greenhouse gas emissions.Credit:

The support for the resolution at AGL’s investor meeting on Wednesday is the biggest vote ever recorded for a climate-focused shareholder push in corporate Australia without board support.

“An overwhelming majority of shareholders in AGL has sent a resounding message to the board of AGL: align your business with the Paris Agreement,” said Dan Gocher of the Australasian Centre for Corporate Responsibility, the activism group that prepared the resolution.

“The erosion in shareholder value appears to have finally united shareholders behind this push.”

As the accelerating clean-energy transition pummels AGL’s profits and darkens its outlook, the company is proposing to split itself into two entities: AGL Australia, to hold its power, gas and telecommunications retailing divisions and some cleaner generation assets; and Accel Energy, to own its carbon-heavy coal and gas-fired power stations that account for 8 per cent of Australia’s overall emissions.

Wednesday’s resolution â€" which called for interim emissions targets for both demerged businesses and details of how their spending plans would align with Paris Agreement goals â€" will not compel the board to act because it depended on the passage of a separate motion to amend the company’s constitution, which did not receive the required support of 75 per cent of shareholders. However, such a significant show of support including by major investors and prominent proxy advisory group Institutional Shareholder Services will be noted as a sharp rebuke of the board’s current approach to the climate crisis.

Ahead of the next major United Nations climate conference later this year, pressure has been building around the world for power companies and governments in developed countries to phase out coal-fired power by 2030 to avoid the worst effects of climate change.

As Australia’s biggest coal-fired power supplier, AGL faced a grilling from shareholders and climate advocates on Wednesday over its contribution to global warming and its plans to keep burning coal until the late 2040s.

AGL chairman Peter Botten urged investors to vote down the climate resolution, saying the targets it called for would require the accelerated closures of AGL’s coal-fired power generators before adequate replacement capacity could be developed. As coal still accounts for about 70 per cent of the east-coast power grid, Mr Botten said early power plant closures would raise the danger of blackouts or power bill spikes in the future.

“The task is to create a glide path rather than a crash landing,” Mr Botten said. “It will require the right policy and investment settings and a focus on customers from all market participants.”

While AGL is preparing to shut down its Liddell coal generator in NSW next year and has committed to reaching “net-zero” emissions by 2050, it is not scheduled to close the neighbouring Bayswater plant until 2035. Its newest coal plant, Loy Yang A in Victoria’s Latrobe Valley, is licensed to run for another 27 years until 2048.

Traditional power providers across Australia have been hit hard by the clean-energy transition. AGL sunk to a $2.06 billion loss in the past financial year, largely driven by an influx of new wind and solar power driving down wholesale electricity prices to levels where coal is increasingly unable to compete. The board has described the past financial year as “extremely challenging” and warned of further profit pain to come.

By creating AGL Australia, which would have a “net-zero” carbon footprint, the board hopes to appeal to equity investors and lenders that are increasingly exiting coal assets as part of efforts to reduce exposure to the risks posed by global warming.

AGL insists the demerger will also be beneficial for Accel, as it would permit a greater focus on the responsible operation of its assets and their transition to lower-carbon energy “hubs”, which may eventually include big batteries, hydrogen manufacturing and carbon capture and storage projects.

“As part of the proposed demerger, AGL Energy will set separate climate commitments for Accel Energy and AGL Australia, enabling each business to focus on their respective strategic opportunities and challenges presented by the accelerating energy transition,” the company has said.

Also on Wednesday, Peter Brooks, an honorary professor at the Melbourne School of Population and Global Health, told AGL’s meeting the climate crisis was a public health emergency, leading to heatstroke and hospital presentations during extreme weather events. “Yet AGL has failed to asset the risk of litigation on health grounds as a material risk,” he said.

And Ashjayeen Sharif, an 18-year-old Melbourne University student, nominated himself for election to AGL’s board with the support of Greenpeace on a platform of shutting the company’s coal plants and replacing them with renewable energy by 2030.

“With the right leadership, AGL can become a genuine renewable energy powerhouse and restore shareholder value to what it once was,” he said.

Mr Sharif’s bid for a board seat was unsuccessful, receiving about 2 per cent of the vote.

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