Long-term investors are showing signs of activism, which could be the start of a shift in the way funds are willing to deploy their significant capital.
The latest example of the beginning of change in global finance is Australia's largest pension fund, AustralianSuper, which opposed the now-failed $11 billion bid by a consortium led by Brookfield Asset Management for Australia's leading energy retailer Origin Energy and EIG.
While pension funds have historically remained largely on the sidelines of passive investing, AustralianSuper's vocal opposition to “a private equity consortium seeking a quick return” shows funds have begun to leverage their significant assets under management and firepower to maintain their advantageous position in the financial markets.
Earlier this week, not enough Origin Energy shareholders supported a takeover bid from the Brookfield-led consortium of investors, leading to the collapse of the planned $11 billion deal.
A total of 68.92% of votes cast by Origin Energy shareholders voted in favor of the offer, falling short of the required 75% majority needed to approve the proposal and implement the deal, the Australian company said on Monday.
AustralianSuper, Origin Energy's major shareholder with a stake of more than 17%, has said it will vote against the proposed takeover terms.
“AustralianSuper strongly believes that the value and future value of Origin is better placed in the hands of AustralianSuper members and other shareholders than in a private equity consortium planning to undercut them,” the fund said last month . Related: Crude oil tanks fall nearly 4% as U.S. production dwarfs OPEC
And after the failed shareholder vote on Monday, the pension fund said: “We have never doubted our belief that the value and future value of Origin is better in the hands of members and other shareholders than in the hands of a private equity consortium. “a quick return.
Origin Energy's board accepted the Brookfield-led consortium's offer in part because of the billions of dollars the bidders had promised to invest to accelerate Origin's energy transition plans. AustralianSuper has argued it could also help secure capital and investment while Brookfield's offer undervalues Origin Energy.
The battle AustralianSuper is waging for control of the Australian energy retailer could be “the start of a very big change in the way markets respond to money and how money works with markets,” said Andrew Polson, managing director of Frontier Advisors , told The Wall Street Journal this week.
“It’s a different dynamic when it comes to where capital is willing to play,” Polson added.
Australia's pension funds, one of the largest in the world, are beginning to demand change and could be a harbinger of a larger global trend.
Earlier this month, AustralianSuper and other super funds in Australia, such as ART, CareSuper, Cbus, HESTA, Hostplus, Rest Super and UniSuper, called for reforms to speed up the approval of transmission and battery projects as well as the development of local sustainable aviation fuels (SAF) industries . These reforms could “drive Australia’s energy transition while delivering returns to pension members now and protecting their pension savings in the future,” say the funds, which total $659 billion (A$1 trillion) in industry super capital.
“The challenge we face is not a lack of capital, but a lack of quality investment opportunities,” AustralianSuper CEO Paul Schroder said.
David Neal, CEO of IFM Investors, noted: “We believe that, with the right policy framework in place, pension capital can increasingly be deployed at scale to drive Australia’s energy transition.”
Meanwhile, pension funds and other institutional investors in Europe have excluded some major oil and gas companies from their portfolios, while some European banks have scaled back funding for fossil fuel projects.
Climate change is the single biggest reason for investment institutions to exclude companies from their portfolios, a newly launched “exclusion tracker” showed earlier this year.
By Tsvetana Paraskova for Oilprice.com
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