How Twiggy plans to rewrite the rules of capitalism

afr.com:

Anyone watching Andrew “Twiggy” Forrest’s presentation at last month’s Boao Forum for Asia will be left in no doubt of the leading role he sees Fortescue playing in the transition to renewable energy.

Andrew Forrest, founder and executive chairman of Fortescue Metals Group, addressing the Boao Forum for Asia in Perth Trevor Collens

“One major company must go first… We’ve decided to go first. It’s essential. I think it will be a very positive journey for shareholders. We are completely decarbonising”, he told the audience in Perth.

Forrest has embraced a strategy that involves him transforming Fortescue, the iron ore giant he founded, into a renewable energy powerhouse, while at the same time achieving zero emissions in its mining operations.

But Forrest’s shake-up of the corporate status quo extends beyond the five high-tech green hydrogen, green ammonia and green fertiliser projects the company is expected to approve later this year.

His decision to set a lower hurdle rate for deciding whether to invest in clean energy projects compared with iron ore projects means Forrest is reworking the whole concept of corporate purpose.

As Macquarie analysts wrote in a research note, “we note projects from Fortescue Energy would have an IRR [internal rate of return] of low to mid-teens, while iron ore projects in its pipeline would have an IRR of more than 20 per cent.”

They added that “reconciliation of the approximately 10 per cent return difference between decarbonisation and iron ore projects would be a focus area, in our view, as a green premium is not yet evident in the equity market for miners”.

It’s hardly surprising that the Macquarie analysts expect Fortescue’s willingness to invest in green energy projects that are half