Long-term investors are showing signs of activism in what could be the beginning of a shift in how funds are prepared to deploy their significant capital.
The most recent example of the start of a change in global finance is the biggest Australian pension fund, AustralianSuper, which has opposed the now-failed $11-billion bid for Australia's top energy retailer, Origin Energy, from a consortium led by Brookfield Asset Management and EIG.
While pension funds have largely stayed on the sidelines with passive investments in the past, AustralianSuper's vocal opposition to "a private-equity consortium seeking to make a quick return" shows that funds have started to use their considerable assets under management and clout to assert their position in the financial markets.
Earlier this week, not enough shareholders of Origin Energy backed a takeover bid from the Brookfield-led consortium of investors, leading to a collapse of the proposed $11-billion deal.
A total of 68.92% of the votes cast by Origin Energy's shareholders were in favor of the bid, short of the required 75% majority necessary to approve the proposal and move the deal forward, the Australian company said on Monday.
AustralianSuper, the top shareholder in Origin Energy with a stake of more than 17%, has said that it would vote against the proposed terms of the acquisition.
"AustralianSuper is resolute the value and future value of Origin is better in the hands of AustralianSuper members and other shareholders than a private equity consortium planning to shortchange them, the fund said last month. Related: Crude Oil Tanks Nearly 4% as US Output Overshadows OPEC
And after the failed shareholder vote on Monday, the pension fund said that "We have never wavered in our belief that the value and future value of Origin is better in the hands of members and other shareholders rather than a private-equity consortium seeking to make a quick return."
Origin Energy's board accepted the bid from the Brookfield-led consortium partly because of the billions of U.S. dollars the bidders had pledged to invest to accelerate energy transition plans at Origin. AustralianSuper has argued it could also help secure capital and investments, while Brookfield's offer undervalues Origin Energy.
The fight that AustralianSuper put up for control of Australia's energy retailer could be "the beginning of a very big change in the way that markets respond to funds, and funds work with markets," Andrew Polson, chief executive of Frontier Advisors, told The Wall Street Journal this week.
"It's a different dynamic in terms of where that capital is prepared to play," Polson added.
Australia's pension funds, one of the world's biggest, are starting to demand changes and could be a precursor 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 accelerate transmission and battery project approvals and the development of local Sustainable Aviation Fuel (SAF) industry. These reforms could "super-power the energy transition in Australia, while delivering returns to superannuation members now and protecting their retirement savings in the future," say the funds with a total of US$659 billion (AUS$1 trillion) of industry super capital.
"The challenge we face is not a lack of capital, but a shortage of good quality investment opportunities," said Paul Schroder, AustralianSuper chief executive.
IFM Investors chief executive David Neal noted, "We believe with the right policy settings, superannuation capital can be increasingly deployed at scale to super-power the energy transition in Australia."
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 financing for fossil fuel projects.
Climate change is the single largest motivation of investment institutions to decide to exclude companies from their portfolios, a newly launched 'exclusion tracker' showed earlier this year.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More