I have always admired Andrew Forrest’s courage and determination in taking on the big boys and turning the Cloudbreak ore body into a highly profitable mining business. It was an ore body that both BHP and RIO had passed over as too difficult to mine. Twenty years later under Fortescue it has the lowest cost of production of any iron ore mine in Australia and Fortescue is the fourth biggest iron ore producer in the world. Twiggy had hoped to use BHP's rail and port facilities but when that was denied he built his own. Clearly, a man who knows where he’s going and is not going to be stopped.

I invested in Fortescue a while ago to get exposure to the China iron ore trade. I tossed up between BHP, Rio and FMG. I chose FMG partly because I like the underdog story and partly because of the very nice dividend yield. It's always nice to have a dividend when the market is offering so little growth. Helps with paying a pension when you are running a super fund. It has not been a sparkling investment for me, but the generous dividend compensates for that and takes some of the risk out of continuing to hold.

When I invested in FMG I never anticipated that Andrew Forrest would make such a big move to combat climate change. I didn’t realise how big that commitment is until I opened this year’s annual report. I don’t usually read the whole of company reports, life’s too short. The CEO’s summary and the financials are enough for me. The rest is usually predictable and probably a repeat of the previous year. The FMG annual report this year however is different. It sets the tone from the very first words and is like no other annual report I have ever read or scanned.

• The Power is Now.
• The Driving Force for our green future.
• Our Values will never change.
• Fortescue’s unique Values drive our performance in a way that sets us apart from others.

Anticipating investor alarm there is then the statement:

‘We have a costed plan to decarbonise our Australian terrestrial iron ore operations in the Pilbara by 2030’

From that beginning the Fortescue annual report reads like a treatise on Climate Change and the resources industry, interspersed with comments on Fortescue’s performance. Not surprising that the investment community is alarmed. Most companies are making a token response to climate change and that’s OK for investment analysts but Fortescue is going the whole hog and commentators don’t know how to respond.

I have to form my own opinion. I need my investments to succeed but having four grandchildren, I worry about the sort of world my generation has created and I don’t see enough being done about it. We cannot continue to pollute our world regardless. Currently any efforts made by individuals to reduce their carbon footprint are obliterated by the giant resource companies. Fortescue is trying to change that and deserves support.

Andrew Forrest obviously likes a challenge. He has made himself the richest man in Australia and can afford to take risks with his money, but he is also taking risks with shareholder’s money and some don’t like it. The share price of FMG dropped following the publication of the annual report along with some high-profile resignations and is now 18% down since early August. Andrew Forrest obviously knows where he is going and does not intend to change. He will need to find senior executives who can, and will go with him.

It’s great to see a company like Fortescue taking the lead but the question for investors is can they make it work financially? Philanthropy is fine but if an endeavour can be profitable at the same time, it is much more likely to have a lasting influence. Our State and Federal governments need to take note. From electric powered mining trucks to an ammonia powered ship Fortescue is pioneering new zero emissions technology. That is one step, but investing in green hydrogen production is another dimension. It’s a big risk but it could be a winner. One thing is certain it will take a long time to deliver a financial return.

One of the more cynical commentators wrote that Andrew Forrest does not do anything unless it makes him money and that he expects green hydrogen to be a big winner for him and the company. He is certainly in on the ground floor and will have first mover advantage. He will also have the backing of the government with a very significant pot of government money.

Twiggy enjoys taking on the odds. If he succeeds he will transform Fortescue and make a big contribution to the fight against climate change. It may be a wild ride but could be a very good one.

If you would like to email Harold, please click here.