Macquarie Group’s ambitious climate commitments and green credentials have been called into question amid revelations the banking giant controls investments in at least 50 companies engaged in the controversial oil and gas extraction technique known as fracking.
The dominant Australian investment bank last week outlined plans to increase investments in green technologies such as electric transport and hydrogen power and also committed to net zero emissions across its investment portfolios by 2050.
Macquarie boss Shemara Wikramanayake. Macquarie is a leader on the green financing push, investing $60 billion in renewables since 2010, but it has also made no secret of its commitment to the oil and gas sector.CREDIT:RYAN STUART
However, according to public disclosures examined by The Sydney Morning Herald and The Age, confirmed by Macquarie, the investment bank and funds it manages for clients hold stakes in scores of companies dependent on fracking for profits.
Hydraulic fracturing, commonly known as fracking, involves blasting a combination of water, sand and chemicals underground to crack rock formations to increase the production of oil and natural gas. The controversial technique has transformed America’s energy industry while becoming a lightning rod for debate over its impact on the environment.
Companies in Macquarie funds that engage in fracking include state-owned energy giants such as China Petroleum and Petrol Corp and Russia’s PJSC Gazprom as well as US titans Marathon Oil, Occidental, Halliburton and Chevron.
In Australia, Macquarie is a majority shareholder in ASX-listed Empire Energy – a company leading the push on fracking operations in contested basins in the Northern Territory. “The US shale oil and gas revolution is coming to Australia,” the company stated in a recent investor presentation.
When asked about Macquarie’s investment in Empire Energy, chief executive Shemara Wikramanayake initially said she had not heard of the company, adding Macquarie did not have a house policy on fracking.
“We don’t have a specific view on fracking, we’re not involved in any fracking projects ourselves. We are really focusing on the solutions and what are the new ways the world can source energy of which there are many which are environmentally friendly,” Ms Wikramanayake said.
Many companies in funds managed by Macquarie’s wholly-owned US subsidiary, Delaware Investments, list a ban on fracking as a material risk to profits. Aberdeen Standard’s ESG director Danielle Welsh-Rose said these disclosures should trigger a “red flag” for investors with net-zero targets. “At a company level, you need to be looking at a credible transition strategy. If a company isn’t able to demonstrate that, it’s problematic.”
Macquarie is a leader on the green financing push, investing $60 billion in renewables since 2010. It has committed to fully exit any coal investments by 2024 and has made public statements on plans to encourage high emitting companies to transition to a decarbonised world.
The investment banking giant has also made no secret of its commitment to the oil and gas sector, a major engine room of its profits. Investors were told in the group’s annual briefing last week that a Macquarie unit maintained its ranking as the number two physical gas marketer in North America and was named Oil & Products House of the Year.
Macquarie controls investments at least 65 global companies involved in fracking. CREDIT:BLOOMBERG
Macquarie’s climate policy states the world will depend on oil and gas “until new, commercially viable technologies are available” although the group declined to respond to questions about whether this involves support for fracking.
The Australian Centre for Corporate Responsibility’s head researcher Dan Gocher said clean technologies “already are available” and the lack of detail in Macquarie’s climate plan around oil and gas was concerning. “It’s one thing to commit to net zero, but what does that look like?”
Fracking has become wildly popular in the US over the past two decades and has enabled private companies to drastically scale up production. However, the controversial technique has triggered countless lawsuits and scientific reviews after videos of Pennsylvanian homeowners igniting methane-laced tap water caused outrage around the world.
In Australia, the Victorian government in March took the dramatic step of amending the constitution to ban fracking forever, after determining the technique posed an unacceptable risk to farming and tourism. This came after the Northern Territory lifted its ban on fracking in mid-2018 after a government inquiry found risks could be reduced to acceptable levels provided 135 recommendations were implemented.
Macquarie Delaware Investments has dozens of funds, some with multiple stakes in fracking companies. At least eight separate funds have stakes in US energy giant ConocoPhillips.
Empire chief executive Alex Underwood said fracking had been “carried out safely in Australia” since 1969 and said the company uses “world best practice to protect the environment”.
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