Resources minister says BlackRock climate change investing move ‘no big deal’

Resources Minister Matt Canavan hits back at fund manager’s efforts to address climate change and global warming.

BlackRock’s decision to sell out of companies that earn more than 25 per cent of their money from thermal coal will have only a minimal impact on Australia’s biggest mining companies in the short term. Picture: Getty Images/AFP

Resources Minister Matt Canavan has dismissed the decision of the world’s biggest fund manager to divest from thermal coal, saying “there is lots of capital in the world”.

BlackRock boss Larry Fink made the call in his annual letter to corporate bosses on Tuesday night after a ramp-up of pressure on the fund manager to take action to match its rhetoric on the risks to its investments posed by climate change.

Mr Fink said the investment risks posed by global warming were set to trigger substantial changes in how it invests $US7 trillion ($10 trillion) in assets, with BlackRock set to divest stocks of companies that make more than a quarter of their money from thermal coal.

BlackRock will also exit debt investments - such as bonds traded on global markets - of the same group of companies, Mr Fink said.

Australian Resources Minister Matt Canavan. Picture: AAP

The latter decision is likely to make it far harder for thermal coal companies to build new mines, given a substantial number of traditional lenders including banks are already becoming reluctant to lend to the sector.

But Senator Canavan, a vocal supporter of Australia’s coal industry who has previously called on Australian banks to back the sector, dismissed the prospect of BlackRock selling shares in Australian coal miners, saying others would take their place.

“There is lots of capital in the world. What will determine future investment in coal is its underlying economics. The International Energy Agency predicts that coal will continue to be the single biggest source of electricity in the Asia Pacific region for decades,” he said.

“Coal will continue to help poorer countries grow and develop. We are lucky that Australian coal is the highest quality in the world and it will remain in strong demand for a long time to come.”

BlackRock’s decision to sell out of companies that earn more than 25 per cent of their money from thermal coal will have only a minimal impact on Australia’s biggest mining companies in the short term, however.

Rio Tinto has already exited its coal business, South32 is in the process of doing so, and less than 3 per cent of BHP’s earnings come from thermal coal.

Most exposed are pure-play coal miners such as ASX-listed Whitehaven Coal, in which BlackRock holds a 2.7 per cent stake, worth $71m on Wednesday, and New Hope Corporation where it holds 4.3 million shares worth $9.1m, according to Bloomberg, or 0.5 per cent of its stock.

While Mr Fink said BlackRock intends to expand the scope of its review to include companies, such as power generators, and “closely scrutinise other businesses that are heavily reliant on thermal coal as an input”, it is not clear whether the review will eventually extend to service providers that make their money from the industry.

BlackRock owns 7.2 per cent of haulage provider Aurizon, for example, recently upping its stake in the rail company - which gets a substantial portion of its business from hauling thermal coal - by 18.2 million shares to 141 million shares, worth $792m.

Major coal companies did not comment on the BlackRock decision on Wednesday, but acting Mineral Council boss Gavin Lind said demand for Australian coal would continue, irrespective of the decision by investors.

“The International Energy Agency forecasts a steady increase in demand for Australia’s world-class coal from Asia. The IEA notes that multiple predictions of terminal decline in demand for coal have been proven wrong and that India and Southeast Asia rely on coal to build infrastructure for their rapidly growing populations,” he said.

“The MCA is confident Australia will remain a reliable supplier of top-quality coal to the world.”

An Aurizon spokesman told The Australian the company “has ongoing, regular dialogue with investors on climate-related risks”.

“Through our market announcements, including our Sustainability Report, we detail in an open and transparent way our exposure to coal (metallurgical and thermal). We are committed to lowering our carbon intensity and being part of the global transition to a lower-carbon future.”