AMP board’s stunning admission: They never considered climate change

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AMP board admitted this week they had been out to lunch on climate change, and had never considered the issue.

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It was AMP’s turn this week to field questions from shareholders about how the company is handling issues of climate change and fossil fuel risk.

It revealed something alarming about how Australia’s third biggest asset manager was managing what has been described by Bank of England Governor Mark Carney as a huge risk to global financial stability.

When asked whether the board supported the goal of keeping global warming to below 2°C and how, through its own business, AMP would contribute to achieving that goal, outgoing Chairman Simon McKeon answered that it’s a question that has never been on the Board’s agenda.

That’s right. Never.

AMP is one of Australia’s largest financial institutions, big in banking, lending, life insurance, superannuation and asset management. It will have exposure to the fossil fuel industry through infrastructure, fixed income, and equity investments and will no doubt already be feeling the financial pinch as we see a multi-trillion dollar market correction begin to take hold.

In fact, as part of a report released earlier this year, Market Forces has already estimated the losses AMP’s My Super No 2. option will have felt from fossil fuels in the last couple of years. Over the period 2014-15, this fund’s returns were dented by 2% thanks to coal, oil and gas companies losing their value.

That works out to an average of $878 per member lost on fossil fuel shares.

AMP’s lack of interest, courage, or whatever has prevented the board from considering the two-degree global warming goal stands in contrast to Australia’s big four banks, who late last year all announced their support for and commitment to the two-degree goal, and at their AGMs went to great lengths to assure shareholder that climate change, its risks and opportunities were discussions the boards were having regularly.

If you’ve followed Market Forces’ work over the past few years, you’ll know that we don’t exactly regard the banks as saints on the issue of climate change.

But at least they have given the matter enough consideration at a board level to publicly state where they stand on the two degree limit agreed to in Paris. In fact, many other Australian investors were clamouring over each other to sign on to statements of support for a strong global deal ahead of Paris. Not so, AMP.

What makes this leadership failure on the issue of climate change and managing the myriad of risks it poses for financial institutions so startling for AMP is that they have actually been active in some areas on the issue of climate change.

They were one of the first funds to announce they would divest from a range of fossil fuel companies in their Responsible Investment Leaders option, one that gets provided by many other smaller super funds who don’t have their own “sustainable” option.

AMP has also asked for companies to explain how compatible they are with a low carbon economy and have even encouraged self-managed super funds to consider the impacts of climate change in their own portfolios.

So at least at a staff and management level, AMP has managed to carve out enough space to consider climate change and its risks for investors. But there seems to be a disconnect between management and the Board.



For the Board of one of Australia’s biggest institutional investors to not even be talking about the global climate change goal, where they stand on the matter and what it means for the company is major omission, both from the perspective of actually wanting to avoid runaway climate change and the wealth destruction that AMP could face without leadership on this issue.

Perhaps a briefing from their own ESG researchers on how climate change could impact their own company would be a useful step in helping AMP’s board get its hands on the steering wheel with this issue.

(Editor’s note: The full board of AMP can be found here. It includes McKeon, a former chair of CSIRO, and Peter Shergold, the former public servant whose Shergold Report helped define former Prime Minister John Howard’s belated push into emissions trading policy.

Julien Vincent is executive director of Market Forces.

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21 Comments
  1. Chris Fraser 3 years ago

    Erm, it’s probably embarrassing for AMP’s life and income protection policies. Since climate change is not existent for them, their fine print wouldn’t mention it, and they would have no choice but to pay claims when a life is (unnessecarily) lost through climate events, or when somebody’s livelihood is lost through drought, flood, incursion from the sea, and a number of other causes. But what would this do to their insurance premiums ?

  2. ben 3 years ago

    Climate change induced events can hardly be classified as force majeure can they?

    • DermotDuncan 3 years ago

      Depends really on the definition on the contract in question: but a good fair question. Firstly, we are concerned with ‘man made climate change’ – so not an ‘act of god’. Secondly, climate change has been on the policy agenda since the 70’s – so clearly foreseeable. Thirdly, damage is foreseeable and causation link could be established subject to circumstances – focusing on ‘negligence’. On the other side, some more sophisticated contracts break up “Force Majeure” into “Compensation Events”; “Relief Events” etc. So, it pays to pay attention to contractual drafting around this issue. One thing is for sure, you can’t put your head in the sand and claim ignorance – no defence!

      • Abel Adamski 3 years ago

        The LNP is fixing that by defunding CSIRO client science, the republicans in Congress and the Senate in the US are trying to do the same. Their are now 2 failed Military satellites that also provided critical sea and land ice measurements, the replacent is gathering dust in a warehouse for several years, but Congress refuses to fund it’s launch as they try to cripple NOAA and NASA’s climate reporting and research.

        You can’t prove it is caused by man, no evidence, so must be act of God

  3. lin 3 years ago

    Just one more reason why company boards need representation from more sections of the community than old rich white men, who as a group have shown themselves to be remarkably persistent in their deliberate ignorance on this issue.

    • Giles 3 years ago

      I think AMP board includes several not so old, but still quite well off, white women.

      • lin 3 years ago

        Honorary members of the boardroom boys club.

  4. Alastair Leith 3 years ago

    Editor’s note link is not linking!

    • Giles 3 years ago

      is now

  5. Alastair Leith 3 years ago

    Astonishing that these people are walking around blind to the single biggest wave about to smash our economy we’ve ever seen and they control a major corporation that deals in insurance. Staggering ignorance and arrogance on the AMP board’s part.

    • Abel Adamski 3 years ago

      And investments, a lot of super they invest

  6. DermotDuncan 3 years ago

    That makes sense. I was trying for years to help AMP with renewables and carbon – no buy-in.

    • Chris Fraser 3 years ago

      If political parties and institutional investors get their scientific advice from Deniers, they will be in for a rude shock !

  7. Alan 3 years ago

    Interesting, as a contrast, that Munich Re – probably the world’s biggest reinsurer, has had a very active climate change research group for many years.

    • Abel Adamski 3 years ago

      Lloyds as well

  8. AOF 3 years ago

    Interesting to note that -absolutely nothing- seems to have changed with the ‘investment acumen’ of the AMP Board in the past 30years, or more..!
    Back in the early 80’s a team of scientists from CSIRO went cap in hand to Sir James Balderstone, then head of the AMP Board seeking funds in Australia to commercialize their brand new global breakthrough ‘DNA manipulation’ discovery which they had called ‘Gene-Shears’.
    His response to them back then was, Quote:
    “Jean-Shears..? What’s that..? Something you cut cloth with..?” No, AMP wouldn’t be interested in funding that.” Un-Quote:
    I am kidding you not…!!
    As a result, the Australian scientists had no other funding choice left but to sell ‘all rights’ to their world breakthrough I.P. DNA discovery to the multinational French, Wellcome group.
    That single AMP Board decision has subsequently cost all Australians multi-Billions of dollars in resulting international pharmaceutical investment income ever since.
    And these are the same AMP financial ‘geniuses’ that ordinary Australians are still, entrusting their entire life’s Super savings with, to manage for their future security..!

    • Michel Syna Rahme 3 years ago

      High time to do a runner out of AMP!
      Those of us ordinary Australians who switched to Future Super, how much was our return last year?…. Wasn’t it over 7%

  9. Paul Mahony 3 years ago

    Something that makes this news somewhat surprising is that the Chairman, Simon McKeon, has been actively involved in the issue outside his duties on the AMP board.

    He is stepping down, and other articles suggest that other board members believe he had been over-committed outside his AMP role. Perhaps a little more focus on AMP matters would have caused him to drive the issue more strongly within the board room.

  10. dhm60 3 years ago

    Astoundingly ill-informed! All of the big reinsurers have entire risk groups focusing on the detrimental effects of climate change to the very business model and…..the planet.
    The leading international think tank of the global insurance industry; the Geneva Association, put out their Climate Risk Assessment paper in May, 2014. I’ll link it in the futile hope that some of these AMP ostriches will read it.

    http://www.genevaassociation.org/media/878686/ga2014-climate-risk-statement.pdf

    Who knows it may spark enough interest to read the Geneva Association’s 2009 report titled: “The insurance industry and climate change.” I may well be dreaming.

  11. Abel Adamski 3 years ago

    Meanwhile we are on track for a possible blue ocean event in the Arctic and an early Greenland melt with very substantial ramifications especially for Northern Hemisphere Climate and Weather which will eventually feed through to us.
    There will be major Global economic/Social and security impacts

    https://ads.nipr.ac.jp/vishop/vishop-extent.html?N

    And from a professional emerging threats analyst who also write fantasy novels for an income rather than depending on suspect funding

    https://robertscribbler.com/2016/05/13/polar-heatwave-digs-in-as-arctic-sea-ice-crashes-blue-ocean-event-looking-more-and-more-likely/

  12. Abel Adamski 3 years ago

    http://www.reuters.com/article/us-usa-oklahoma-earthquakes-idUSKCN0Y30DC
    Insurers shun risk as oil-linked quakes soar in Oklahoma
    As the number of earthquakes in Oklahoma exploded into the hundreds in the last few years, nearly a dozen insurance companies moved to limit their exposure,
    often at the expense of homeowners, a Reuters examination has found.

    Nearly 3,000 pages of documents from the Oklahoma Insurance Commission
    reviewed by Reuters show that insurers and the reinsurers who cover them
    grew increasingly concerned about exposure to earthquake risks because
    of heightened frequency of seismic activity, which scientists link to
    disposal of saltwater that is a byproduct of oil and gas production.

    Even as they insured more and more properties against earthquakes in the
    past two years, six insurers hiked premiums by as much as 260 percent
    and three increased deductibles. Three companies stopped writing new
    earthquake insurance altogether, state regulatory filings obtained by
    Reuters show. Several insurers took more than one of those steps.

    In addition, the insurers would consider suing oil and gas companies for
    reimbursement in instances where they would have to pay damages to
    homeowners, according to several sources, including two insurance
    company officials.

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