ESG Focus: Coal Showdown At The ESG Corral – Part One

ESG Focus | Apr 15 2019

FNArena's dedicated ESG Focus news section zooms in on matters Environmental, Social & Governance (ESG) that are increasingly guiding investors preferences and decisions globally. For more news updates, past and future:

Consensus is that it’s not a matter of 'if' for coal's decline but 'when'. FNArena reviews a number of factors affecting the pace of the global transition. This is Part One.

- More than 100 major global financial institutions have divested from thermal coal
- More than 78% of global asset owners are seeking to align investments with the UN’s Sustainable Development Goals
- Institutions are pushing banks for greater transparency on carbon exposure
- The world’s biggest developer of coal-fired plants is now investing in renewables

By Sarah Mills

The rate of global ESG adoption, and the growing exodus of financial institutions has accelerated sharply within the past year.

Readers who are yet to catch up with this new dynamic that is increasingly commanding investors' attention are being directed towards FNArena's dedicated website section on the theme; ESG Focus.

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In January, Jeremy Grantham, co-founder of US$118bn Boston-based asset management firm Grantham, Mayo & van Otterloo (GMO), and one of Bloomberg’s “50 Most Influential”, declared thermal coal “dead meat”.

He added the life of coking coal would only exceed that of thermal coal by a maximum of 20 years.

The exodus

In March, The Institute for Energy Economics and Financial Analysis (IEEFA) published a report on the state of play with institutions and coal.

The report points out that more than 100 major global financial institutions have divested from thermal coal, including the top 40 global banks and 20 globally significant insurers.

More than five major financial institutions divested in the first nine weeks of 2019, and in the past two weeks, five more have divested, including the first major Chinese institution: the State Development & Investment Corporation.

Since January 2018, a bank or insurer announced their divestment from coal mining and/or coal-fired power plants every month, and a financial institution who had previously announced a divestment/exclusion policy tightened up their policy to remove loopholes, every two weeks,” states the IEEFA report.

By the end of 2018, 415 global investors managing a collective US$32trn called for a complete thermal coal phase out by 2030 across the OECD. China is also committed to phasing out coal.


Lets not forget the Climate Action 100+ group

To date, more than 300 investors managing US$33trn have signed on to the initiative.

They are mobilising across dozens of countries to apply pressure on carbon emitters and support for the Financial Stability Board’s Task Force on Climate-related Financial Disclosures has tripled.

According to a Morgan Stanley survey of 118 global asset owners, more than four in five asset owners are pursuing or considering ESG integration and more than two thirds had allocated funds to some form of ESG strategy.

More than 78% sought to align their investments with the UN’s Sustainable Development Goals.

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