By Catherine Watson
BASS Coast Shire Council has put to rest claims that its fossil-free investment policy would cost ratepayers a small fortune.
It hasn’t. In fact, the cost of preferring banks that don’t bankroll fossil fuel companies turned out to be so modest – just 0.03 per cent, or $10,000 across a full financial year – that even councillors seemed a little surprised.
The new analysis, presented at yesterday’s council meeting, shows the doomsday predictions were wildly off the mark.
BASS Coast Shire Council has put to rest claims that its fossil-free investment policy would cost ratepayers a small fortune.
It hasn’t. In fact, the cost of preferring banks that don’t bankroll fossil fuel companies turned out to be so modest – just 0.03 per cent, or $10,000 across a full financial year – that even councillors seemed a little surprised.
The new analysis, presented at yesterday’s council meeting, shows the doomsday predictions were wildly off the mark.
When the council first considered divesting from banks and other financial institutions that fund fossil fuel developments, back in July 2016, it provoked howls of derision.
“Have they lost their marbles completely?” the South Gippsland Sentinel-Times editorialised.
“The council has no mandate for stuffing around with our money, especially in these tight times … If the mob sitting around the council table at the moment can’t see that, we should chuck the lot of them out at election time.”
The council has an investment portfolio of over $50 million, comprising prior year appropriations for specific purposes, deferred income allocations, capital works carry overs, and accumulated surpluses and allocations to general purpose strategic reserves.
In 2021 it reviewed its investment policy and strengthened its commitment to divest from fossil-fuel-aligned banks, as required by its Climate Change Action Plan.
Local commentators denounced the move as “virtue signalling” and “wasteful”, warning that councillors were risking hundreds of thousands of dollars in lost returns to impress the climate lobby.
The big sticking point was a clause allowing council to accept up to 0.3% below the best rates when investing with fossil-free banks. That was raised to 0.5% in a 2023 review to speed up the divestment process.
As it turned out, the world is now divesting so rapidly from fossil fuel projects that the differential was hardly necessary. Over the 18 months since the policy came into effect, the actual difference between council’s returns and the absolute best rates available was 0.03% per annum – one-tenth of the allowable margin.
In dollar terms: about $10,000 for the year ending 30 June 2025.
Council officers noted that, far from compromising financial performance, the divestment framework “has not had a material impact on yields”. The investment portfolio outperformed the Reserve Bank rate by about 0.75%, generating an extra $270,000 for the budget.
The revised policy also allows the council to invest in slightly lower-rated but still secure institutions such as community banks (A+, A, A– and BBB tiers), provided the quoted rate is within 0.5 % of the best available rate.
Under the updated policy adopted on Wednesday, council will now report publicly each year on the actual return compared with the highest available alternatives, including fossil-fuel-aligned banks.
“Have they lost their marbles completely?” the South Gippsland Sentinel-Times editorialised.
“The council has no mandate for stuffing around with our money, especially in these tight times … If the mob sitting around the council table at the moment can’t see that, we should chuck the lot of them out at election time.”
The council has an investment portfolio of over $50 million, comprising prior year appropriations for specific purposes, deferred income allocations, capital works carry overs, and accumulated surpluses and allocations to general purpose strategic reserves.
In 2021 it reviewed its investment policy and strengthened its commitment to divest from fossil-fuel-aligned banks, as required by its Climate Change Action Plan.
Local commentators denounced the move as “virtue signalling” and “wasteful”, warning that councillors were risking hundreds of thousands of dollars in lost returns to impress the climate lobby.
The big sticking point was a clause allowing council to accept up to 0.3% below the best rates when investing with fossil-free banks. That was raised to 0.5% in a 2023 review to speed up the divestment process.
As it turned out, the world is now divesting so rapidly from fossil fuel projects that the differential was hardly necessary. Over the 18 months since the policy came into effect, the actual difference between council’s returns and the absolute best rates available was 0.03% per annum – one-tenth of the allowable margin.
In dollar terms: about $10,000 for the year ending 30 June 2025.
Council officers noted that, far from compromising financial performance, the divestment framework “has not had a material impact on yields”. The investment portfolio outperformed the Reserve Bank rate by about 0.75%, generating an extra $270,000 for the budget.
The revised policy also allows the council to invest in slightly lower-rated but still secure institutions such as community banks (A+, A, A– and BBB tiers), provided the quoted rate is within 0.5 % of the best available rate.
Under the updated policy adopted on Wednesday, council will now report publicly each year on the actual return compared with the highest available alternatives, including fossil-fuel-aligned banks.