Australia’s AGL Energy case shows the growing power of green capital

Last month, a clean energy investor named Simon Holmes à Court, son of Australia’s first billionaire, helped to oust the country’s coal-friendly conservative government. A few days ago, a 42-year-old Sydney tech billionaire, Mike Cannon-Brookes, upended AGL Energy, a 185-year-old mainstay of Australia’s business establishment and its biggest carbon emitter.

The two men belong to a new generation of wealthy businesspeople ready to use their resources to hasten a shift away from fossil fuels. Both exemplify the growing power of green capital, in Australia and beyond, but Cannon-Brookes offers a wider lesson in the risks of deficient climate policy driving a disorderly energy transition.

Feeble climate action was squarely targeted by the so-called Teal independent candidates who won a string of conservative-held seats in the May 21 election, after backing from Holmes à Court. It is still unclear what Cannon-Brookes, co-founder of the Atlassian software group, will ultimately achieve at AGL, but the victory he has scored so far marks a striking development in climate investor activism.

On Monday, AGL announced the exit of its chief executive, chair and two board members as it ditched a plan to split itself in two by spinning off a power generation business that includes coal-fired power stations, one of which is not due to shut until 2045.

Cannon-Brookes, who has an 11 per cent stake in AGL, had opposed the break-up and wanted the coal plants to close much earlier. He claimed the company, which rebuffed a takeover bid he made with Canada’s Brookfield Asset Management firm earlier this year, was wedded to a “glacial” transition away from fossil fuels that was bad for the climate and for its business.

With other shareholders voicing concern about the spin-off plans, AGL has abruptly abandoned its strategy and headed into an unsettling period of headless limbo. Its remaining directors will begin a strategic review.

Cannon-Brookes, who is seeking to have two nominees on the board, says he has “a lot of ideas” for what its future direction should look like. Other investors, and trade unions representing workers at AGL coal power stations, are eager to know his plans too. Even those who support his critique of AGL’s slow pace of decarbonisation are unsure what a tech entrepreneur, albeit a highly successful one, can offer a complex, integrated energy business.

The AGL affair comes almost exactly a year after the small Engine No. 1 hedge fund unexpectedly won a campaign to replace three seats on the board of ExxonMobil. The US oil giant had also been accused of failing to plan adequately for a shift away from fossil fuels.

AGL has in some ways been the author of its own woes. It has been evident for some time that, despite unimpressive federal government climate policy efforts, Australia has become a rooftop solar powerhouse where more than one in four households generates electricity on their roofs. That has eroded the profits of the coal-fired power stations that have accounted for a large chunk of AGL’s profits.

The company has been a victim, too, of Canberra’s failure to deliver robust carbon pricing or other policies to guide a steady transition to a cleaner power system. Five years ago, as a previous AGL boss embraced renewables and pursued a future without coal, then prime minister Malcolm Turnbull publicly fought its planned closure of an ageing coal power plant because of fears it would hurt energy security.

The AGL case shows that if governments are slow to put credible green transition policies in place, climate investor activists are increasingly ready to try and do it for them.