Countries are beginning to consider the poisons from coal to be comparable to the use of tobacco for the human race.http://www.bloomberg.com/news/2013-11-20/coal-seen-as-new-tobacco-sparking-investor-backlash-commodities.htmlCoal Seen as New Tobacco Sparking Investor Backlash: CommoditiesBy Jesse Riseborough & Thomas Biesheuvel - Nov 20, 2013 9:23 AM PT
About $8 trillion of known coal reserves lie beneath the earth’s surface. The companies planning to mine and burn them are being targeted by a growing group of investors concerned with the greenhouse gases that will be made.
Storebrand ASA (STB), which manages $74 billion of assets from Norway, sold out of 24 coal and oil-sands companies since July including Peabody Energy Corp. (BTU), the largest U.S. coal producer, citing a desire to cut fossil-fuel industry holdings. This month Norway’s opposition Labour Party proposed banning the country’s $800 billion sovereign wealth fund from coal investments.
“Maybe we’ve hit some kind of nerve in the debate,” Christine Torklep Meisingset, Storebrand’s head of sustainable investments in Oslo, said by telephone. “Hopefully, other investors will be acting along the same lines. There could be an interesting parallel to tobacco.”
The movement is an offshoot of a campaign by more than 70 investors to pressure all fossil-fuel industries on climate change. It harks to the 1990s anti-tobacco push and is gaining help from unlikely partners. The International Energy Agency, a 28-nation group promoting energy security, is lobbying increasingly to limit the release of heat-trapping gases.
“Investors make decisions everyday on buying and selling stock and we’re confident that the strong long-term outlook for coal and Peabody’s specific investment appeal will carry the day,” Vic Svec, a spokesman for Peabody Energy, said yesterday by phone. “Coal has been the fastest-growing major fuel around the world for the past decade and is expected to surpass oil as the world’s largest energy source.”
Coal, whose burning spews about twice the greenhouse gases as natural gas, is not in retreat. In 2011, coal was used to generate 30.3 percent of the world’s primary energy, the highest level since 1969, according to the World Coal Association, an industry trade group. That share slipped only to 29.9 percent last year.
Investors cite both ethical and financial concerns with carbon-bearing fossil fuels. The Norwegian fund, the largest of its kind in the world, owns shares in some of the biggest coal producers including a $2 billion holding in BHP Billiton Ltd. (BHP), the biggest mining company and stakes in Glencore Xstrata Plc, the largest coal exporter, and Anglo American Plc.
The call to divest coal holdings is a political issue that the fund won’t comment on, said Thomas Sevang of Norges Bank Investment Management, which manages Norway’s sovereign wealth fund. “We’re investing according to the mandate that we have at any given time.”
Future curbs on carbon emissions beyond 2020 may cut valuations on coal assets by as much as 44 percent, according to HSBC Holdings Plc.
“There is the beginnings of divestment out of pure play coal by some investors,” Nick Robins, head of HSBC’s climate change center of excellence in London, said in a Nov. 12 phone interview. “There’s been a very marked rise in concern about this issue. There’s a recognition that as you move to a low-carbon economy that coal is potentially most vulnerable.”
Like tobacco companies, coal producers may move to paying high dividends to attract investors amid an uncertain longer term future for the fuel, Meisingset said.
A group of 70 investors including California’s two largest public pension funds and F&C Management, holding more than $3 trillion in combined assets, wrote to the world’s top 40 oil, gas, coal and electric power companies in September urging them to assess the risks climate change poses to their business.
International Energy Agency Executive Director Maria van der Hoeven last week described coal as the “biggest elephant in the room” in the debate about how to shift away from fossil fuels to help manage climate risks. Coal-fired power stations remain the cheapest form of energy for developing nations, she said. The agency has said coal demand would need to fall by 3.5 percent a year in the 2020s to meet the 2-degree target.
Greenhouse gas emissions from the energy industry are forecast to rise 20 percent above 2011 levels by 2035, according to a Nov. 12 report by the IEA. This means that global temperatures could rise an average of 3.6 degrees Celsius above pre-industrial levels by mid-century, far above the internationally agreed-to target of 2 degrees.
UN scientists said in September that humans have now emitted more than half the carbon permissible to remain within the 2-degree limit. To meet that target, about two-thirds of proven fossil-fuel reserves must remain in the ground, mostly coal, according to the IEA.
“Coal must change rapidly and dramatically for everyone’s sake,” Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change, said in a Nov. 18 speech to industry executives at the Warsaw Coal & Climate Summit. “The coal industry faces a business continuation risk that you can no longer afford to ignore.”
Negotiators in Warsaw are hoping to develop a plan to reach a global agreement at the 2015 summit in Paris. Countries at a climate summit in Doha, Qatar, at the end of 2012 committed to adopt a broad climate pact in 2015 to give nations time to ratify the agreement so it can go into effect in 2020.