Has coal divestment worked? – a detailed financial analysis

“Ethical Markets welcomes this brilliant new report on risks to portfolios with fossilized assets. As we have reported since 2010 (on www.ethicalmarkets.com) mainstream models have mis-priced energy and risks, due to  obsolete asset allocation buckets.  See also my “Assessing Risk of Fossil Reserves:  Are they Fuel or Feedstocks?”   With a stroke of a pen, algorithms could be updated by changing the categories of these fossil reserves from  “fuel”  to be burned to “feedstocks” stored underground for possible later us in materials, chemicals, plastics, etc.  In the short-term  they should not be wasted by burning them  and ruining the Earth’s climate as well!  As Daniel Kahneman  says in his “Thinking Fast and Slow” we are dealing with asset managers and owners suffering from “theory-induced blindness”!

~Hazel Henderson, Editor”

$185 billion in equity value is held in listed thermal coal producers globally

Most of the shareholders are strategic Asian investors but BlackRock & Vanguard retain at least $3 billion in thermal coal

 

New research by InfluenceMap tracks the links between the coal reserves (the mines), the operating coal companies and the shareholders who own these companies.  117 listed companies have thermal coal production of 3bn tons per year and control 150bn tons of reserves, which represents more than 6 times the carbon budget allowed to achieve 1.5C global warming.[1]

“Pensions only make sense on a planet with a future; there’s no place where the argument for divesting is clearer.”

Bill McKibben, 350.org

The role of coal in the world’s energy mix will be a key topic both at the upcoming COP meeting in Bonn and G20 discussions in Berlin in July where climate is certain to be on the agenda.  While Europe is being urged to shut its 300 coal fired power plants by 2030 to meet its Paris Agreement commitments, Japan appears ready to build up to 45 new coal plants in the coming years.  The overwhelming majority of supply and demand for thermal coal remains in China and India, although recent reports has put this demand in doubt.

“It is clear from the data that thermal coal has become largely uninvestable over the last five years for mainstream asset managers and owners alike.  We look forward to tracking this trend and indeed seeing the impact the divestment movement has on the much larger oil and gas fossil fuel asset classes.” 

Dylan Tanner, Executive Director,

InfluenceMap   

This study also assesses coal divestment commitments of some of the largest pension funds.  Asset managers and owners representing over $5tn in value had made some kind of divestment pledge by the end 2016.[2] The study finds the world’s second largest pension fund, in Norway, has shed 83% of its physical coal so far in its divestment programme, while California public sector pension funds CalPERS and CalSTRS are on track with their 2017 coal divestment plans.  These three asset owners alone represent almost $1.5tn in assets.
The remaining shareholders of thermal coal roughly fit into three categories.  Strategic investors in China and India (governments, individuals, power companies, special purpose companies), leading US asset managers Blackrock and Vanguard; and number of mid-size US and other asset managers who have been bulking up on coal in the last five years in anticipation of a resurgence of some of the remnants of the US coal bankruptcies and growth in Asia.  Notably absent from the list of large shareholders of thermal coal are leading financial groups such as Aviva, AXA, Allianz, Aegon and Legal & General, through their insurance and asset management operations alike (the first four of whom have made divest statements), and large pension funds such as CaLPERS and the European pension funds.
The trend in divestment continues with the NGO movement pushing for the next $5tn in assets under management to make pledges with a focus firmly on pension funds around the globe.
Where the shareholders are:

*Some countries’ % totals do not appear in the map but are incorporated into the region total.

Download the report here.