BLACKROCK is the latest investor firm to call it quits on thermal coal.
In a letter to its clients, the world’s biggest fund manager stated that in response to clients’ concerns about the impact that sustainability factors were having on economic growth, asset values and financial markets, it would no longer invest in companies sourcing more than 25pc of revenue from thermal coal.
It marks a 180 degree turn on its previous program of aggressively buying Australian coal stocks in 2019.
In outlining its reasons for a new approach to sustainability, BlackRock stated “the most significant of these factors today relates to climate change”.
“Namely, how the global transition to a low-carbon economy could affect a company’s long-term profitability.
“The investment risks presented by climate change are set to accelerate a significant reallocation of capital, which will in tun have a profound impact on the pricing risk and assets around the world.”
The company said that as thermal coal was significantly carbon-intensive, it is increasingly exposed to regulation and becoming less and less economically viable due to its environmental impacts.
It said it did not believe that the long-term economic or investment rationale justified continued investment in the sector, and that it would closely scrutinise businesses that were heavily reliant on thermal coal as an input.
In coal-reliant economies such as Australia, this scrutiny could extend to energy-intensive businesses such as aluminium smelters – the Tomago aluminium smelter uses 10pc of all electricity in NSW – and power generators.
“As a result, we are in the process of removing from our discretionary active investment portfolios the public securities (both debt and equity) of companies that generate more than 25pc of their revenues from thermal coal production, which we aim to accomplish by the middle of 2020,” the statement said.
“As part of our process of evaluating sectors with high ESG risk, we will also closely scrutinise other businesses that are heavily reliant on thermal coal as an input, in order to understand whether they are effectively transitioning away from this reliance.”
BlackRock’s revenue threshold means that major coal producers like Glencore, BHP and Anglo American will still be avenues of investment as their coal earnings pale in comparison to other revenue sources such as copper or iron ore.
