ASX companies worth $500 Billion could seek a safe haven re-listing on the Singapore Exchange :Climate litigation and crusading judges a toxic mix, raises judicial risk in Australia to worrying levels

by Ganesh Sahathevan

The SGX says that with listed companies diversifying into mineral, oil and gas activities, it is timely to review the sector's listing rules to ensure they remain relevant for the market and investors.PHOTO: REUTERS

Mining, oil, gas and coal companies listed on the Australian Stock Exchange worth approximately $300-$500 Billion could seek a safe haven from the threat of climate litigation heard before Australian judges who seem to be increasingly inclined to play activist rather than judge.


De-listing from the ASX and re-listing on the SGX coupled with incorporation offshore could well place Australian listed companies outside the reach of judges like Brian Preston, Chief Judge of the Environmental Court  who is also an "Expert Group" member of the climate change advocacy group Climate Principles Group , and who somewhat predictably decided against a coal mining project in NSW.

The danger of judicial or J-Factor risk, to borrow a term from distress debt investing is likely to grow given the recent trend by even senior Australian judges to involve themselves in public debate.


The upcoming case of McVeigh v REST  which is expected to be heard before the Federal Court in July this year is being given much publicity and while the orders McVeigh seeks  would seem strange to any investment professional, the courts may well decide in favour of MCVeigh in keeping with current popular sentiment for large companies to be made accountable for climate change.

A decision against REST may then force other superannuation funds, which collectively control approximately 40% of the ASX, to force listed companies to make disclosures about "climate risk".The compliance burden would be great, and in many instances impossible to comply with.If Brian Preston's judgment is followed companies and super funds would have to start  provisioning for changes in the climate at some point in the future, based on the assumption that the climate will change, that the planet will get hotter, that catastrophes will follow, and that they will be held responsible if not be adversely impacted by the change. 

Given the above scenario it would be simpler for Australian companies to simply de-list from the ASX and re-list on the SGX.While the Singapore Government has signalled action on climate change, it is not proposing to dismantle its oil and gas industries. Importantly unlike their Australian counterparts, Singapore's judges have never shown a tendency to be activists. 

It would therefore make sense to manage assets and seek capital out of Singapore; additionally the Singapore Government offers tax and other incentives to companies willing to make Singapore their regional or global headquarters.
Any impairment caused Australian assets by climate activism can be better managed from a Singapore base, where access to Asian capital may well provide the flexibility to shutter mines, and re-open when the political and judicial environment changes.
The German experience suggests that the costs of any climate activism will be too great for the Australian economy to bear.
Not only is the Australian economy smaller and more volatile (given the reliance on commodities), a growing social security bill means that tax revenues from large mining companies will always be needed to fund government expenditure.

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(Note: The figure of USD 300-500 Billion is an estimate based on the total market capitalisation of the ASX in 2019 ,which was then estimated at USD 1.3 trillion). It is assumed that mining oil and gas companies, as well as those in related industries  comprise approximately 30-50% of the total .



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SEE ALSO
The Rocky Hill Land and Environment Court decision-Did the Court ignore the basic rules of causation?



January 07, 2020

by Ganesh Sahathevan

Justice Brian J. Preston

As reported by the ABC:

Gloucester Resources Limited took the NSW Planning Minister to court over the matter of his disallowing the Rocky Hill coal mine after his delegate, the Independent Planning Commission, rejected the company's application for the Rocky Hill mine in late 2017.

The company argued the development would have created 170 jobs, with the mine expected to produce 21 million tonnes of coal over 16 years.

However Chief Judge Brian Preston ruled the negative impacts of the mine outweighed its economic and other public benefits.In his words:

"...... the [greenhouse gas] emissions of the coal mine and its coal product will increase global total concentrations of [greenhouse gases] at a time when what is now urgently needed, in order to meet generally agreed climate targets, is a rapid and deep decrease in emissions".


As one can readily see from the above statement,there are a number of assertions, indeed declarations made by the Chief Judge which cannot actually be proven.

First, the precise mechanism via which which greenshouse gases from the mine and its coal product will feed into the atmosphere need to be established.Preston said nothing about that.

Then , even if the above could be safely assumed,  Rocky Hill if operational  is just one mine, so how its greenhouse gas emissions "will increase global total concentrations" is hard to comprehend.

How and when greenhouse gas emissions from its coal products "will increase global total concentrations"is even harder  to comprehend.The Chief Judge has again said nothing about causation expect to declare that Rocky Hill will produce something "bad" at a time when reduction of that thing "is now urgently needed, in order to meet generally agreed climate targets".

Any junior lawyer can tell you that nothing gets taken to court if one cannot prove causation, regadrles of how obvious causation might seem.
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