Origin Energy Ltd (ASX: ORG) announced today that it will raise $2.5 billion at a lowly price of $4 per share.
In case you were wondering, Origin Energy has performed very poorly for shareholders, in the last couple of years. Of course, ethical superannuation funds and those institutions who divested have dodged a bullet by avoiding exposure to the company. And those copping the losses can't complain. After all, they were repeatedly warned.
The story of Origin Energy is particularly interesting from an ethical investing standpoint, because it highlights the nexus between ethics, culture, and shareholder returns.
Back in September 2013 I criticised Origin Energy's CEO, Grant King, for his commentary on renewable energy policy, and Origin Energy's dedication to fossil fuels.
I then linked this short-sighted corporate culture at Origin Energy to a high likelihood that it would fail shareholders, just as (in my view, at least) it had failed society. I said:
Origin may or may not succeed in profiting at the expense of the renewable energy industry. Concerns that its investment in LNG will not pay off may or may not be well-founded. With this company, the potential rewards are great, but the risks substantial. In any event, investors must consider the culture of the company they invest in, as this is likely to have an impact on returns over the long term. To quote Buffett again, "In businesses, culture counts."
Back then, Origin Energy shares were trading at around $14. It's worth noting the share price was even higher when John Hewson warned investors about the risk.
Now, shareholders will be offered shares at a measly $4. And on the open market, shares last traded at $6.10, representing a whopping loss of over 50% in almost exactly 2 years, as the chart below demonstrates:
Sure, Origin Energy might flourish in the long term, but I doubt it. The same problems I identified in 2013 still persist. Of course, if Origin Energy did more to support renewable energy, and less to support coal seam gas, it might be a different story — and they would have avoided the current situation.
But if nothing else, the share price collapse shows once again that, at least sometimes, ethical investing is an advantage.
For example, market-beating fund managers Australian Ethical Investments (ASX: AEF) sold their Origin Energy shares in 2011, because they viewed Origin's activities to be unethical. Back in those days, shares were around $16, so the decision has paid off massively for all the people who trust Australian Ethical with their savings and superannuation.
The bottom line is that each and every Australian should make sure their superannuation fund has a plan to divest risky fossil fuel assets. Such companies are a poor choice for retirement savings, and may undermine our wealth.
Consider divesting because it's the right thing to do… and also to preserve your wealth.
