BHP Billiton is known as “The Big Australian”. It’s a famous nickname among Aussie investors, given BHP’s history as one of the largest companies on the local stock market. The company has been around since 1885 and is part of the fabric of Australian business life, having employed and trained thousands of employees who today lead various businesses around the world.
Last week’s decision to divest (or ceremoniously disguised as a merger) its energy assets means it is taking its sustainability future seriously. It also means that the movement away from fossil fuels and traditional energy is now a mainstream consideration for boardrooms around the world.
Australia has seen several prime ministers lose their jobs over our energy policy. Ironically, it has been the mining lobby who agitated and instigated most of the pushback on these leaders. The lobby is now seeing one of its own, perhaps the largest player, now moving towards the inevitable. How quickly times change.
BHP will pass its assets onto Woodside Petroleum and existing shareholders will now have a choice in which shares they own. If they’re against fossil fuel investments, they will likely sell or switch their Woodside assets for BHP. It's a smart move by BHP and a risky one for Woodside. Sure, the latter picks up a once in a generation asset purchase opportunity, but at what cost?
What happens in Australia and specifically with BHP will have ramifications for similar moves around the world. Socially responsible investing is no longer a fringe consideration, but now a mainstream play. There will be big ramifications. BHP overnight becomes a lot more attractive to socially responsible investors, while Woodside goes in the other direction.
My note this week is shorter than usual as I contemplate the investment opportunities around this trend. I was recently interviewed by Money Magazine on sustainable investing and I’ll share that interview, along with my notes, with you next week.
“You only have to do a few things right in your life so long as you don’t do too many things wrong.” – Warren Buffett