Mclowd Community Newsletter December 2019

Welcome to the Mclowd Community Newsletter

If the Australian Government fails to take sufficient action to reduce the country’s Carbon Risk Profile, domestic and international investors can be expected to address the issue by demanding a ‘Carbon Risk Premium’ for investing in Australia, and in doing so driving shifts in activity which favour markets which have for historic or policy reasons a much lower carbon intensity.”
Carbon Crunch: Emissions Growth and Long Run Carbon Pricing, 2008

Introduction

Alcoa recently announced that it was placing its Portland aluminium smelter under review, based in part on the plant’s emissions-intensity.

Portland gets its electricity from coal-fired power stations in the La Trobe Valley (and accounts for 10% of Victoria’s entire electricity demand). This fact is inconsistent with Alcoa’s stated goal of becoming “the lowest emitter of carbon dioxide amongst all global aluminium companies.”

The smelters at Tomago (NSW) and Boyne Island (Qld) are under threat for similar reasons.

That the capital tied up in these facilities – not to mention many thousands of jobs – could shortly be extinguished should act as a reminder to SMSF investors of:

  • The role that carbon risk may come to play in global capital markets
  • The role those same capital markets play in transmitting the probability of future events (whether economic or ecological) into present day asset values

Accounting Software Update

We recently deployed an upgrade to the Statement of Financial Position, bringing the workflow associated with this report into line with incumbent platforms.

While the release was not large in the context of our current WIP priorities, it was noteworthy because it involved a number of Practitioner and Trustee users, who collaborated with both the Support and Development Teams to deliver this improvement over the course of the last few weeks.

In that context I wanted to acknowledge the participation of all those users who have worked with us over the course of 2019. Their efforts are allowing us to more actively benchmark system output against those platforms.

In every respect except price.

Conclusion

The ATO recently went to some lengths to remind SMSF Trustees regarding the importance of portfolio diversification.

The campaign was focused on asset allocation, but failed to consider the role that geographic concentration might also play in relation to overall investment risk.

Whether it is equities or property, financial services or agriculture, by its very nature the SMSF sector is (and will probably always be) Australian-centric.

As such the carbon risk profile of those retirement assets is inherently tied to that of the country as a whole.

For good or ill.

Regards

Ashley Porter

Managing Director
Mclowd Pty Ltd

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