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senate vote 2022-11-22#13
Edited by
mackay staff
on
2022-12-30 16:15:50
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Title
Bills — Emergency Response Fund Amendment (Disaster Ready Fund) Bill 2022; in Committee- Emergency Response Fund Amendment (Disaster Ready Fund) Bill 2022 - in Committee - No investment in fossil fuels
Description
<p class="speaker">Barbara Pocock</p><p>by leave—I move Greens amendments (1) to (3) on sheet 1703 together:</p>-
- The majority voted against [amendments](https://www.openaustralia.org.au/senate/?id=2022-11-22.179.1) introduced by South Australian Senator [Barbara Pocock](https://theyvoteforyou.org.au/people/senate/sa/barbara_pocock) (Greens), which means they failed.
- ### What did these amendments do?
- During her second reading speech, [Senator Pocock explained](https://www.openaustralia.org.au/senate/?gid=2022-11-22.173.1) that the amendments were introduced:
- > *... to increase the spending cap from $200 million to $300 million a year and to require the Future Fund in its management of the Disaster Ready Fund to ensure that the fund is not invested in fossil fuels. It's a rich irony which cannot be lost on so many Australians that the Disaster Ready Fund is invested in the very same coal, gas and oil companies whose activities are causing the climate emergencies that the fund has been set up to mitigate.*
- ### Amendment text
- > *(1) Schedule 1, page 7 (after line 28), after item 26, insert:*
- >
- >> *26A Section 4*
- >>
- >> *Insert:*
- >>
- >> *fossil fuel financial asset means a financial asset that relates directly to:*
- >>
- >> *(a) infrastructure that is intended to be used wholly or predominantly for extracting, processing (including refining), transporting or exporting coal, gas or oil; or*
- >>
- >> *(b) a person that operates such infrastructure; or*
- >>
- >> *(c) a related body corporate (within the meaning of the Corporations Act 2001) of a body corporate that operates such infrastructure.*
- >
- > *(2) Schedule 1, item 105, page 20 (line 21), omit paragraph 34(1)(c), substitute:*
- >
- >> *(c) $300 million; or*
- >
- > *(3) Schedule 1, page 23 (after line 4), after item 112, insert:*
- >
- >> *112A After section 36*
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- >> *Insert:*
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- >> *36A Prohibition on investing in fossil fuel financial assets*
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- >> *(1) The Future Fund Board must ensure that no investments of the Disaster Ready Fund are fossil fuel financial assets.*
- >>
- >> *(2) Subsection (1) does not apply in relation to a financial asset to which section 9A (about transitioning investments of the Emergency Response Fund) applies.*
- >>
- >> *(3) However, if a financial asset to which section 9A applies is a fossil fuel financial asset, the Future Fund Board must realise the financial asset as soon as practicable after the commencement of this section.*
- >>
- >> *(4) This section has effect despite any other provision of this Act.*
<p class="italic">(1) Schedule 1, page 7 (after line 28), after item 26, insert:</p><p class="italic">26A Section 4</p><p class="italic">Insert:</p><p class="italic"><i>fossil fuel financial asset</i> means a financial asset that relates directly to:</p><p class="italic">(a) infrastructure that is intended to be used wholly or predominantly for extracting, processing (including refining), transporting or exporting coal, gas or oil; or</p><p class="italic">(b) a person that operates such infrastructure; or</p><p class="italic">(c) a related body corporate (within the meaning of the <i>Corporations Act 2001</i>) of a body corporate that operates such infrastructure.</p><p class="italic">(2) Schedule 1, item 105, page 20 (line 21), omit paragraph 34(1)(c), substitute:</p><p class="italic">(c) $300 million; or</p><p class="italic">(3) Schedule 1, page 23 (after line 4), after item 112, insert:</p><p class="italic">112A After section 36</p><p class="italic">Insert:</p><p class="italic">36A Prohibition on investing in fossil fuel financial assets</p><p class="italic">(1) The Future Fund Board must ensure that no investments of the Disaster Ready Fund are fossil fuel financial assets.</p><p class="italic">(2) Subsection (1) does not apply in relation to a financial asset to which section 9A (about transitioning investments of the Emergency Response Fund) applies.</p><p class="italic">(3) However, if a financial asset to which section 9A applies is a fossil fuel financial asset, the Future Fund Board must realise the financial asset as soon as practicable after the commencement of this section.</p><p class="italic">(4) This section has effect despite any other provision of this Act.</p><p>I foreshadowed the amendments in my speech, so I don't need to speak to them.</p> <p class="speaker">Murray Watt</p><p>The government does not support the amendments proposed by the Greens, and I will quickly run through why. One of the amendments seeks to increase the annual disbursement amount from what will be the Disaster Ready Fund from $200 million per year to $300 million per year. I inform Senator Pocock that, fundamentally, the reason for us opposing this amendment is to preserve, if you like, the principal of the fund so that it has enough money in it to be invested and to keep generating the return that we would then be spending on disaster mitigation going forward.</p><p>The Future Fund Management Agency has considered the proposal in your amendment and advised that it would likely deplete the fund. It would essentially be taking out too much every year from that principal, rather than making sure that there were funds left to be invested. The bill's $200 million per year limit for resilience mitigation has been set for long-term sustainability of the fund, making sure that we can deliver sufficient funding for disaster resilience, while not overdrawing the fund. None of us, I think, would want to get to a point where this fund is fully depleted and unable to invest in that disaster mitigation going forward, and $200 million a year is the amount that we're advised can be spent from the fund every year without depleting it.</p><p>Aside from that, that figure lines up with what has been recommended for investment in disaster mitigation at the federal level by the Productivity Commission. They delivered a report in 2015 which recommended that the Commonwealth invest up to $200 million per year on resilience projects and for that to be matched by the states and territories. That's what we're proposing to do here. The amount also lines up with figures that the Insurance Council of Australia has called for to be invested in mitigation, which hopefully will provide some level of insurance relief to Australians as well.</p><p>This is far from the only investment that our government is making in disaster resilience. While I appreciate Senator Pocock's desire to see even greater investment in disaster mitigation, our position is that we're keen to do that but not necessarily only through this fund. In addition to the funds that this bill will provide for, we've recently committed $800 million with the New South Wales government to the New South Wales Resilient Homes Program for home buybacks and house raising and mitigation. We've also committed $750 million with the Queensland government for a similar program in Queensland. So there is significant money for betterment funding of infrastructure to bring it to a higher standard in both Queensland and New South Wales.</p><p>The second proposal put forward by Senator Pocock in her amendments is essentially around the investment strategy to be used by the Future Fund. The government is not able to support this proposed amendment to introduce what would be a prohibition on certain types of investments from the Future Fund. However, the finance minister will work with the Future Fund and the Department of Finance to explore options for investments within the Future Fund that better align with the government's commitment to net zero by 2050.</p><p>The legislation governing the Commonwealth's investment funds requires the board to maximise returns over the long term, consistent with best practice for institutional investment. The board integrates environmental, social and governance considerations into its decision-making process by assessing the potential impacts of ESG matters on the risk and return of the portfolio. The board also exercises its ownership rights associated with investments according to the board's ESG policy, which considers a range of issues, including climate change, human and labour rights, sustainable supply chains, corruption and bribery. For those reasons, we'll be opposing the amendments.</p> <p class="speaker">Perin Davey</p><p>The opposition will also be opposing these amendments. As pointed out by the minister, one of the core things that would make for the success of this bill is the ability for the fund to generate returns. I note the government have made quite the story about the fact that, since its inception, the Emergency Response Fund has generated $800-odd million of returns on the initial investment. They are returns that are now in the fund. They are not returns that have been squandered or used by the former government in any way, shape or form, and they now underpin the ability for this fund to generate further returns. I really do want that noted.</p><p>We also would not support anything that ties the hands of the Future Fund and its ability to invest following best practice and due diligence. On that basis, we will not be supporting these amendments.</p> <p class="speaker">David Pocock</p><p>If I may, I'll follow up with a question to the minister relating to this amendment. I'm interested to understand the government's thinking and direction it intends to go with the Future Fund in maximising returns versus investing in industries that are adding to climate change—which we are seeking, in this piece of legislation, to mitigate and adapt to. How are you weighing that up? Do you not see something like the Future Fund as having a requirement to invest in companies and industries that are congruent, that align with a future that Australians can be excited about and where young people can look us in the eye and know that we're doing what's required?</p> <p class="speaker">Murray Watt</p><p>Thanks, Senator Pocock, and thank you for your constructive engagement on this bill more generally. As I was saying in my speech—I'm not sure if you were here for that part of it—of course our government is taking serious action on climate change and the root causes of it, being carbon emissions. I think you supported the legislation that we put through the parliament around increasing Australia's emission reduction targets. That's what we really need to do, to bring down those emissions, and we're taking action on a global stage by being an active participant in negotiations around these issues internationally.</p><p>When it comes to these investments, the finance minister is intending to work with the Future Fund and the Department of Finance to explore what options there are for investments, with the Future Fund, that better align with the government's commitment to net zero by 2050. I'm not in a position—that's not my role, finance minister—to give you a lot more detail at this point about exactly where that's heading, but that certainly signals to me an intention from the government to consider these issues.</p> <p class="speaker">Barbara Pocock</p><p>I have two questions for the minister, and thank you for that clarification. You've used the language of 'alignment with the government's values' in the direction that you will now give to the Future Fund. Can you explore, a little further, what lies underneath that alignment? Is that an instruction to not invest in climate-destroying fossil fuels? What will that instruction say about fossil fuels? That's my first question.</p><p>My second question is this. The PBO says that, at $3 billion in the fund, a drawdown of $300 million a year will permit the fund to last until 2047. When do you want to exhaust the fund? On your projections, keeping at $200 million a year drawdown, what year would you be exhausting the fund as currently proposed in the bill?</p> <p class="speaker">Murray Watt</p><p>or WATT (—) (): Thanks, Senator Pocock. In relation to your first question, I probably can't give too much more detail than what I've already said today, which is that this is something that is being explored by the finance minister in discussions with the Future Fund, as to what the investment strategy of the Future Fund is. I'm sure that Senator Gallagher would be happy to talk with you a bit further if you'd like to have some more detail about that. But, clearly, by me saying that we intend to better align the investment options with the government's commitment to net zero by 2050, this is clearly something that the finance minister is giving some thought to.</p><p>For your second question, I must admit I haven't seen that PBO research that you're citing. What we're relying on, as I said earlier, is the advice from the Future Fund. That advice is that, really, we can only have a maximum of $200 million per year to ensure that we don't run down the principle of this fund at any point. I stand to be corrected by the advisers who are here, but my understanding is that we don't see the fund being fully depleted by setting a $200 million mark. Obviously, the amount that the fund earns every year will differ depending on investment returns in the market. Even in the time I was the shadow minister, I remember there were some years that generated a very big return, and some years generated a lower return. But, if you like, the $200 million figure is essentially an averaging out—and I don't mean that precisely; I'm just talking generally. But that is an average amount that we could spend from this fund while maintaining that principle at around the $4 billion mark so that we can keep investing it and generate the kinds of returns that we can then spend every single year.</p> <p class="speaker">Slade Brockman</p><p>As I haven't heard the entire debate, I'm happy to move to a division on this amendment. I'll seek your guidance, Chair. I have a more general question for the minister.</p> <p class="speaker">Penny Allman-Payne</p><p>Senator, you can ask a general question now.</p> <p class="speaker">Slade Brockman</p><p>Minister, I'll take you back to my time as policy director with the Pastoralists and Graziers Association. One of the difficulties Western Australia had with the exceptional circumstances legislation in agricultural support is that the particular circumstances of Western Australia, in terms of its geographical spread of population, was quite different to the eastern states. Have you considered how disbursements from this fund will cater for the particular requirements of the jurisdiction of Western Australia, given that, whilst we are relatively small in terms of population, we are a significant contributor to both the economic output of Australia and the economic exports from Australia?</p> <p class="speaker">Murray Watt</p><p>I'm not sure if you heard the part of the debate where I was mentioning that we're currently in the process of developing the guidelines for how this fund will be used, the types of things it will be able to be used for and where it would be spent.</p><p>I would not envisage that we would go forward with a specific allocation by state or territory, and I don't think that was done under the former scheme by the former government. But I would certainly expect that all states and territories would share in the benefit of these funds. I think it's pretty commonly known that there are some parts of the country that are more disaster prone than others, so it may well end up being that there is a bit of weighting towards those. But none of those decisions have been made at this point in time. I'd be more than happy, if you'd like to participate in the consultation about those guidelines, to include you in that.</p> <p class="speaker">Slade Brockman</p><p>I certainly accept that some parts of Australia are more population heavy and differ, perhaps, in terms of the particular needs of individuals and communities within the Australian society. However, I'm wondering if, for those guidelines, you would envisage taking in economic impacts as well as purely human impacts?</p><p>The TEMPORARY CHAIR: Senator Brockman, in future, wait for the call, please. Minister.</p> <p class="speaker">Murray Watt</p><p>Thank you, Chair. I'm sure the former President of the Senate respects your upholding of the standing orders and processes here! As I say, Senator Brockman, we're still working through what the guidelines would involve. But I think it's a fair point that you make—that we need to be thinking not just about human impact but about economic impact. I had some meetings today with some groups about the economic impacts on supply chains that we see from natural disasters, so I think it would be reasonable to expect that there would be a broad range of factors that would be taken into account in determining what gets funded and what doesn't. But again I'd be happy to take any thoughts that you've got as we're preparing these guidelines.</p> <p class='motion-notice motion-notice-truncated'>Long debate text truncated.</p>-
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