Eco Investor February 2014

Editorial

Diary of an Eco Investor 1

Victor Bivell

The Start - 23 December 2013
It's two days before Christmas and 2014 is next week so now seems like a good time to start something I've had in the back of my mind recently - Diary of an Eco Investor. The idea is to put down some of my thoughts as I go about trying to manage my modest portfolio of shares and other assets in an environmentally positive way. It could be investment decisions, insights, reactions to news, successes and failures and highs and lows.

I've been interested in environmental investment since I wrote The Environmental Investment Directory of Australia 1992 and I started Eco Investor magazine in 2005. So there is no way I can recap what I've experienced and learned in that time, except to say I believe that with investment and the share market you never stop learning, so I'll start here and move forward with what is happening now.

Unbanking Coal
Yesterday I took ANZ Bank out of my universe of shares I follow.

I've always thought a good way to do environmental investment in a small equities universe like Australia is to have an environmental theme as part of a larger portfolio of assets. Earlier this year I expanded my universe of non-environmental shares to about 28 by adding 14 companies I think are ethical and doing interesting things. The other criteria were that they pay regular, fully franked dividends.

That meant I had a legacy group of about 14 or so non-environmental companies that I've been gradually sorting through, and these included the big four banks. I've been thinking lately about the environmental ethics of cash and the big four, and yesterday I took off ANZ from that list because of its support for coal mining.

I read a media article by professor Ian Lowe about how at the ANZ annual general meeting a group of shareholders challenged the company about its loans to coal projects. I knew the big banks fund coal developments. What got me was the chairman's unwillingness to let the shareholders have their say and to address their issues.

Professor Lowe wrote "Pressed on the financial and reputational risk, after being reminded that the World Bank is now questioning the viability of new large export coal mines, the chairman said he was not prepared to answer any further questions about the bank's funding of the resources sector. Several more speakers attempted to probe the issue, but they were told to leave the microphone and sit down – even an Indigenous woman who had travelled 700 kilometres to ask her question."

That's wrong. I don't think chairmen should be suppressing shareholders' rights to ask questions. They should be encouraging it, and they should be able to answer. I got a bad feeling about ANZ and did a Google search on "Big four bank loans to coal mining" and up came some research by Marketforces comparing all the Australian banks' exposure to coal and gas activities.

And there at the top of the list was ANZ with $2.3 billion worth of loans. Commonwealth Bank had $1.5 billion, National Australia Bank $1.4 billion and Westpac $1.1 billion.

That was enough for me and I decided to take ANZ off my list. Fortunately I wasn't holding any ANZ shares so that made it easy to implement.

The research also showed that the smaller banks such as Bendigo Bank, Bank of Queensland, bankmecu and Members Equity have no coal loans. Perfect.

But only the first two are listed and I still wanted a fourth bank on my list. Only Bendigo Bank had clarified its position on coal mining while Bank of Queensland had not. I'm happy to keep Bank of Queensland as a possible future option, but meanwhile I'm happy with Bendigo.

I know from past research that Bendigo Bank has for some years been doing community activities to raise environmental awareness and has done a lot for community banking so for a while I have been interested in it as a possible alternative to the oligopoly positions of the big four. They also have some ethical investment initiatives.

A quick check showed Bendigo Bank pays regular fully franked dividends and it's in the ASX 100, so it was an easy decision and all I had to do was get into my spreadsheet and replace ANZ Bank with Bendigo Bank.

I have two long standing investments in Westpac and NAB which I do not want to give up. I have also liked Commonwealth Bank for a long time and had success with it. Bendigo is a good new number four and also addresses my desire to diversify from the big four. I'm happy to have it on my list, learn some more about it, and see if there is an opportunity to invest.

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