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World Biggest Investors Raise Coal Holdings (Despite Their Green PR Campaigns)

Financial Times

The world’s biggest investors, including BlackRock, Vanguard and Axa, have ramped up holdings in coal since the landmark Paris climate agreement, raising the question of how seriously they take the issue of tackling global warming.

The UN’s Intergovernmental Panel on Climate Change said in October that coal use would have to be heavily reduced to meet the aim of the agreement. Under the 2015 pact, almost all the world’s countries agreed to limit the global temperature rise to below 2C compared with the level before the industrial revolution.

After Paris, many asset managers, including BlackRock and Axa, said climate change presented an increasing risk to investment returns.

However, a new report from InfluenceMap, a UK non-profit organisation, finds that big investors with a combined $40tn in assets had increased their holdings in thermal coal by a fifth between 2016 and 2018.

“The data show the world’s leading fund managers have clearly increased their investment in thermal coal assets since the Paris agreement,” said Thomas O’Neill, research director at InfluenceMap. “This is surely not consistent with the IPCC’s recent statements on the fuel, nor a Paris-aligned world.”

The report comes out as world leaders meet in Katowice, Poland, for the annual UN climate talks, which last until Friday. Signatories of the Paris agreement will try to agree on how the deal will be implemented from 2020.

Global carbon dioxide emissions are set to hit a record high this year, mainly due to growth in fossil fuel consumption. The International Energy Agency said construction of coal plants, particularly in Asia, had created a “disconnect” between the goals of the Paris accord and the reality in energy markets.

Banks have faced pressure to stop lending to new coal projects and nearly all European banks have adopted some form of anti-coal finance policy. The role of asset managers that hold stocks in coal companies has, however, been subject to less scrutiny.

According to InfluenceMap, BlackRock, the world’s largest asset manager with $6.4tn in assets, has the largest absolute holdings in thermal coal. It also has the most coal-dense portfolios measured by thermal coal intensity (TCI) — or assets under management compared with coal holdings.

BlackRock had a TCI of 571 across the $2.3tn of assets examined — 50 per cent higher than the benchmark average for the world’s 60,000 largest funds. Much of its exposure to coal is in its passive investments, which track an index rather than actively making bets.

Vanguard, JPMorgan and State Street were also in the top five for thermal coal intensity.

The report says that French insurance company Axa, which has a policy to shift away from investment in coal, has more than doubled its thermal coal holdings since Paris. InfluenceMap said much of the increase was linked to Axa’s majority-owned subsidiary AllianceBernstein acquiring stakes in Peabody Energy and Arch Coal.

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