Comment: ANU divestment: it’s not ‘the economy, stupid’

The response to the Australian National University’s decision to divest itself of holdings in certain fossil fuel companies has been way out of proportion to the importance of the decision—and both sides of the debate are long on rhetoric and short on facts.

It is misleading to argue, as Richard Denniss has done, that the Australian National University is in the same position as a private investor whose investment decisions should be theirs alone. The ANU is a public institution and more than 60% of its income comes directly from the government.

Nor can I agree with Sinclair Davidson’s claim that the ANU is trashing the domestic economy or placing the livelihoods of thousands of Australians at risk on a whim. If the ANU had the investment power to bring down the mining industry, I suspect we’d know about it already.

The problem is that the argument has focused on whether the industries represented by the companies being divested are important for Australia’s economy, especially the contributions from Infrastructure Minister Jamie Briggs and the Treasurer.

This argument is overdone. The ANU holds about $16 million in shares in the seven companies (disclosure: the CEO of one of the seven, Iluka Resources, is on the board of the Centre for Independent Studies). That $16 million is about 1% of the university’s total investment holdings, and the revenue from the entire portfolio was barely 5% of the university’s total revenue. The ANU’s holdings represent less than 0.05% of the combined market capitalisation of those companies which approaches $40 billion.

These investments are not financially significant for the university or the companies, and so the impact on the economy as a whole will almost certainly be negligible. Which makes the overreaction from politicians up to and including the Prime Minister puzzling. At a time when the government is trying to encourage greater financial independence among universities it seems very odd to try and micromanage their investment decisions.

Unless the ANU’s new strategy mentions an exciting new investment in magic beans, if it’s not imposing greater costs on the taxpayers then it really shouldn’t be the business of government.

The government’s interest here is limited to protecting taxpayers by ensuring the ANU exercises due diligence and care with taxpayers’ funds. Despite Denniss’ claim, this is why the principles of ANU’s investment strategy matter: public institutions should be careful with the public’s money.

So it is worth asking why the divestment decision appears to contradict the expert advice of Deutsche Bank, given DB’s global transactions head is on the council. If the ANU becomes more of a burden on the taxpayer, then it should be expected to review its investment policies as well as its cost structures.

However these questions have nothing to do with the broader impact of energy companies in the Australian economy or the importance of revenue from mining to the budget. This is not an issue government should put on any investor; no-one is under an obligation to be a cheerleader for Australia with investment funds.

By contrast, divestment is an expression of free speech. In fact it is one of the more valuable aspects of speech because people are a lot more honest with their money than they are with their slogans (as the failure of ‘buy Australian’ industry policy continually demonstrates).

The problem is when supposed social responsibility transfers costs to taxpayers. Recent months have seen several occasions where social and political causes have intruded on investment and fundraising decisions for bodies receiving significant taxpayer support.

Such was the concern over the decision of the board of the Biennale festival earlier this year to terminate its relationship with Transfield Holdings.

Leaving aside the culture wars elements, there are serious concerns about the financial viability of future events if private funding (like the estimated over $600,000 provided by Belgiorno-Nettis for Biennale) is lost or discarded. Taxpayers may not welcome the alternative of the arts community becoming even more dependent on public funding. It is one thing to take an ethical stand with your own money—it is altogether different if the taxpayers foot the bill for your ideological cant.

Too many non-government organisations and other rent-seekers want to have their public funded cake and eat their private progressive values too. By all means, use your free speech to criticise undesirable industries and divest any shares you hold, but don’t think this entitles you to extra taxpayer money if it leaves you out of pocket.

Critics of the ANU and Biennale would have a much stronger case if they limited themselves to these sort of arguments for responsibility with taxpayer funding. With apologies to James Carvill, in this case, it’s not ‘the economy, stupid’.

Simon Cowan is a Research Fellow at The Centre for Independent Studies.