Fund manager ‘green shorts’ AGL, Qantas

Last June, AGL announced that it would split its coal-fired power plants into a separate company called Accel Energy. Its other company, to be named AGL Australia, will keep its electricity, gas and telecommunications business together with some cleaner generational assets.

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AGL declined to comment.

Qantas pointed to comments from President Richard Goyder from November last year, saying the company’s net zero target would be met by expanding biofuel use, buying carbon offsets and embracing new hydrogen and electrical technology when it becomes available.

Plato portfolio manager David Allen said the ASX is a primary target for green shorting because of its high concentration of carbon-intensive industries, such as mining and agriculture, which are facing a pressure on profits as global economies decarbonize.

“Unfortunately, ASX is one of the least developed markets in the world. It’s not quite as bad as emerging markets, but it might be expected,” Mr Allen said.

The fund also has green shorted global equities, including Singapore Airlines and Hong Kong Electric, as part of a strategy to target companies that will suffer from increased climate regulation, such as carbon prices and shifting consumer satisfaction towards green companies.

Short-selling is a trading strategy that aims to take advantage of the fall in the price of a security. An investor borrows shares and sells them for the purpose of buying them back at a lower price with profit.

Green shorting can also be used to increase pressure on companies to take bigger steps to prevent catastrophic climate change, Mr Allen said, with short selling a blunt tool that can push stock prices down and make it harder to raise capital.

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“The path the world is taking to net zero, even when it is most optimistic, is a little too little, too late,” Mr Allen said. “There will be a huge amount of damage between now and then [2050] and I think we need to look at ways we can be more aggressive and proactive to reach net zero. “

Sir. Allen said that green shorting as an investment strategy is in the early stages of Australia, but that it is likely to increase around the world as investors develop new ways of investing sustainably.

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“The companies that will be rewarded will be the ones that are on the right side of the debate,” he said. “The fund we’ve launched here is the first one I’ve seen that really takes this activist approach.”

Sir. Hamson said the fund had already seen interest from a number of large pension funds, adding that the demand for sustainable investment strategies was rising from large institutions to retail investors who “want to do the right thing for the environment”.

“It’s changed a lot in the last couple of years with the drought, the fires,” Mr Hamson said. “Climate skeptics are very much becoming a minority.”

Plato’s net zero fund does not rely on CO2 credits, which can reduce a portfolio’s emissions by financing projects such as tree planting, because Mr Hamson said these will become increasingly expensive as companies and governments rely on set-offs to achieve the net zero targets.

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