Opponents query cost of 'visionary' decision

Hilary Calvert.
Hilary Calvert.
The Dunedin City Council's decision to dump investments in fossil fuel extraction is being hailed as visionary, but opponents warn it will come at a cost to ratepayers.

Councillors on Tuesday voted on an ethical investment policy for the $76.3 million Waipori Fund, deciding not to invest in the munitions, tobacco, fossil fuel extraction, gambling or pornography industries.

This means it will divest itself of any investments in those industries, including much of the $1.7 million invested in fossil fuels, within two years.

The decision to include fossil fuel extraction in the policy has been praised as ''precedent-setting'' for New Zealand but councillors Andrew Whiley and Hilary Calvert were yesterday worried about the cost to ratepayers.

A report by Russell Investments provided to councillors estimated not investing in fossil fuels would have cost it $2.2 million - or $170,000 a year - in the period between 2000 and 2013.

An ethical investment policy, including alcohol (which councillors on Monday voted against adding to the policy), tobacco, gambling, armaments and fossil fuels was estimated to cost the council about $500,000 a year.

Mayor Dave Cull said other councils would probably follow Dunedin's lead.

''I think they are going to have to. I think the imperatives of climate change are such that everybody is going to have to grapple with it,'' Mr Cull said.

It would be ''inconsistent'' for the council to be taking measures to mitigate the effects of climate change while investing in ''the things that actually cause'' it. There was also an ''increasing appreciation of the risk'' of investing in fossil fuel companies.

''As the world has to grapple with moving to a low-carbon economy that actually the carbon reserves ... won't come out of the ground, so the asset value of those companies will go down.''

Mr Cull was keen to point out that councillors voted against investing in fossil fuel ''extraction'' and not the retail of fossil fuels.

Dunedin City Council group chief financial officer Grant McKenzie said an ethical investment policy would probably lead to more ''volatility'' in the fund, as the stocks excluded tended to be ''steady'' or ''countercyclical''.

Countercyclical stocks did better during difficult financial times than other investments, Mr McKenzie said.

Running costs of the fund were also likely to increase.

''It often costs more to have a socially responsible investment policy because you are having to do more research on the companies.''

Staff would come up with more precise estimates of the costs, he said.

Cr Calvert said the decision was ''irresponsible'' because councillors were not fully aware of how much it would cost ratepayers.

''We are arguing about $20,000 here and there, and with the stroke of a pen councillors were prepared to cost the ratepayers of Dunedin close to $170,000 [a year],'' she said.

Cr Whiley said the move sent a ''very negative message'' to companies exploring for gas off the coast of Otago. The city should be welcoming them and he hoped the move would not put them off using the city as a base if commercial quantities were found.

The council would still be investing in companies that produced greenhouse gas emissions, meaning ''nothing is going to change'', he said.

Mr Cull took issue with both Cr Calvert and Cr Whiley's criticisms, saying all councillors had a copy of Russell Investments' report and knew about the financial implications.

The decision was ''a completely separate issue'' to oil and gas exploration off the coast of Otago.

''They are not coming to us for investment; they would be looking for a logistical base.''

Cr Jinty MacTavish, a strong advocate for including fossil fuels in the policy, said all Dunedin people should be ''proud'' of the decision.

''I am really proud of our city, not just the council, but I am really proud of our community for standing up so strongly and saying that they wanted an ethical investment approach.

''I think Dunedin has led the way on a number of issues and this is just another example of Dunedin being the leader in progressive policy,'' she said.

Green MP Gareth Hughes, one of many to praise the decision on social media yesterday, compared the council's move with the beginnings of the Nuclear Free movement.

''It's a bold foresighted step that is showing true national leadership and I congratulate the council,'' Mr Hughes told the Otago Daily Times yesterday.

The decision received praise from climate-change action groups 350 Aotearoa and Coal Action Network Aotearoa.

The issue prompted a stoush between councillors on the Progas Otago Facebook page, with Cr Kate Wilson taking issue with Cr Whiley including her on a list of councillors who voted for fossil fuels to be included.

Cr Wilson said she abstained from the vote, which eventually prompted Cr Whiley to amend the list and apologise.


Fossil fuel move

• DCC thought to be first council in New Zealand to divest itself of investments in fossil fuel extraction.

• The city joins more than 20 United States cities, including San Francisco, Seattle, and a Dutch town, that have done so.

The Waipori Fund
• Established after the Dunedin City Council in 1998 sold its 100% holding in Waipori Power Generation Ltd and its 42% holding in United Electricity Ltd.

• After repaying associated debt, the council was left with just over $56m cash.

• That became known as the Waipori Fund, which has been a significant contributor to council coffers since.

• Provides a source of revenue that can be used to offset rates.

• The last annual return to the council recorded, to the end of the last financial year in June 2013, was $7.5m.


 

Do you support the decision by the Dunedin City Council to adopt an ethical investment policy for the $76.3 million Waipori Fund?

Telephone your answer today to the Otago Daily Times' Teletopics line (03) 467-7123, Dunedin-area calls are free; email us at odtfeedback@odt.co.nz.

 

vaughan.elder@odt.co.nz

Untouchable Cosa Nostra joint

BMC, Well, I dunno, it's good that ratepayer money is not invested in weapons, inflatable 'dolls' and Mistress Quickly, dont you think?

In for a penny, in for a pound

So exactly how strongly does the council feel about these industries deemed so dirty & 'untouchable' . Are their ethics strong enough to not want to accept funds from them at all perhaps?

Maybe they feel that they cannot accept any rate payments from them. Just imagine, No rates from the local alcohol outlets or retailers that sell cigarettes; No rates from fossil fuel suppliers or local engineering industry that service the fosil fuel mining/drilling sector or even service stations; No more rates from local gunshops, ammunition wholesalers, gunsmiths; No rates from casinos or the local hospitality trade that have pokies; No more rates from the adult shops or brothels.

Suddenly a 3% rate increase doesn't seem so bad for the unlucky ratepayers who are left to pick up the slack. eh?

Not well done Alfie

Even the Green Party recognises that the proportion of wealth retained in the country from an oil or gas discovery is way more than 5%. They say 46%. In practice it varies from field to field, but is commonly in the half to two-thirds range.
The oil and gas industry will be with us for a long time yet. Usage is growing, year by year, and will continue to do so until other forms of energy become more practical and economic.

Truly visionary - not

To FeetFirst. The Dow Jones Sustainability Index includes oil and gas companies. And so it should. Oil and gas companies lead in ethical and sustainable practices - because they have to. And the slavery comparison is just wrong. Slavery was a means of subjugating and depriving people of their rights, and was a despicable practice. Oil and gas has been the means to elevate a large portion of human society to a level of prosperity and wellbeing which would otherwise have been unattainable.
As the Russell Investments report noted, if the council had not held its oil and gas investments, by comparison with its other investments it would have lost $2.2 million over a 13 year term. So your points are incorrect.
I personally object to DCC wasting time and money (ratepayers money) discussing such a foolish topic when they have much more important issues to address, such as the stadium debt. Their decision was not an ethical one, it was a hypocritical one given that like everywhere, the city runs on oil and everyone's prosperity and life style benefits are tied to it.  In due course the world will gradually move away from oil and gas reliance, as it pursues efficient, effective and economically viable energy alternatives.
The degree to which oil and gas usage is driving global temperatures upwards is quite modest, and over the next few decades anyway, it will be largely beneficial to global climate and prosperity rather than detrimental. The DCC's obeisance to a false god, and their associated time and money wasting, fills me with disgust.

Well done DCC

This is a good move from our Council. Councillors Calvert and Whiley throw up red herrings by suggesting that this move will somehow lose the ratepayer money, when in fact the diverted funds will be invested elsewhere. And as FeetFirst  points out, the Dow Jones Sustainable index already outperforms the "unethical" index so this is likely to result in a win for ratepayers.

I can understand people like RHill clinging to a forlorn hope that an oil or gas discovery off our coastline might somehow enrich our local economy. But the reality is that the profits from this type of activity inevitably go offshore with less than 5% being retained in NZ. The potential environmental damage associated with deep sea drilling for a tiny return is just not worth the risk.

While individuals are welcome to invest where they see fit, the use of fossil fuels will continue to decline over the next century and ethical investing is a wise choice where public money is involved.

Further proof if any were needed

This is just another example that this council like the last has no idea what so ever on fiscal responsibility, we won't invest in these areas but will continue to invest in professional rugby, ethical yeah right.

If the question of ethics is their true reason why is alcohol not being included afterall alcohol causes more social ills than any of the others.

rage against the machine

One again another do nothing go nowhere feel good decision.

And Dunedin once again is slip sliding away. Soon you will be the 9th largest city in new Zealand.

Ethical decision

The only ethical decision would be to close up the Waipori fund with all monies to be directed in debt reduction.

Sex mad gun runners

Really, has the city ever invested in pornography or the armaments industry?

Visionary this time

Fernfrond has come up with a suggestion that for once genuinely deserves the label visionary: "If the DCC wants to do something ethical how about no more handouts using ratepayer money to the stadium?"  
Alas he is delusional - must be something in the water if he thinks there is a snowball's chance of that happening.

Truly visionary

When slavery was abolished in Britain, critics claimed it would destroy the economy and destroy British power. But when principles overcame greed and self-interest, even that economic argument was seen to be false.

The Dow Jones Sustainable index already outperforms the general one. The Council has made a very prudent economic decision - to avoid the risk of investing in stranded assets - as well as a principled decision that makes me extremely proud of Dunedin. The Council has also listened to all the submissions and agreed with public sentiment.

No-one believes the rapid transition to a low carbon economy (that we now know is necessary if we are going to have anything like a liveable climate for future generations) will be easy. It is with public leadership like this however that we can start. When we all start walking the talk, as our Council has done here, we stand a chance. What vision and action.

So predictable

Unethical? How about they take their keys out and walk.

A disappointing decision

I do not support the ethical investment policy being implemented by the council.
It is not explained how oil companies are unethical.  All oil companies have ethics codes in place that are very progressive.
The criteria appears to be plucked out of thin air.
This policy is damaging to Dunedin in the way that businesses will view and want to invest in it.
If oil or gas is found off the coast of Otago, this policy will deny the people of Dunedin any financial reward that could be gained from investment into infrastructure and services related to the oil and gas sector.

Ethical?

If the DCC wants to do something ethical how about no more handouts using ratepayer money to the stadium?

Nonsensical and meaningless

Nonsensical and meaningless 'feel good' gesture, which serves nothing except to inflict some further costs on the ratepayers. How do Jinty and her ilk think the city would run without oil? Horse and cart to bring produce to the supermarket? I dont think it will affect any oil company's bottom line or market value in the slightest.I guess it will make her and Gareth Hughes happy.

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