Norway sovereign wealth fund dumps AGL, puts BHP on watch over coal
The world’s biggest sovereign wealth fund has dumped AGL and put BHP on a watchlist over their involvement with coal.
The world’s biggest sovereign wealth fund has ousted AGL Energy from its $1tn ($1.5tn) investment portfolio and put mining giant BHP in the sin bin over the duo’s exposure to thermal coal.
Norway’s central bank, Norges, said Australia’s largest electricity generator was dumped from the fund after new coal thresholds were introduced.
The investment giant sold its 0.5 per cent stake in AGL, worth $65m, was sold by the Norwegians which amassed the fund’s riches over decades as one of Europe’s biggest oil producers.
AGL owns the Liddell and Bayswater coal power plants in NSW and the Loy Yang A coal station in Victoria’s LaTrobe Valley.
BHP was placed on an ‘observation list’ with a call to be made depending on whether it reduces coal exposure or boosts its revenues from renewable energy.
The miner supplies thermal coal from big operations including its Mt Arthur mine in NSW’s Hunter Valley and a one-third stake in the Cerrejon mine in Colombia.
The Norwegian fund has prohibited investments in companies with more than 30 per cent of their operations in coal or those that extract more than 20m tonnes of coal annually.
Both Australian companies declined to comment.
BHP’s rival, Glencore, was also excluded despite its recent move to freeze production over climate change concerns.
Norway’s $100bn pension fund KLP also sold its stakes in Australian companies including AGL and BHP last year following a decision to cut exposure to coal.
The divestments reflect a growing shift among pension and sovereign wealth funds to chop fossil fuel exposure as part of efforts to combat climate change and meet the goals of the Paris climate accord which aims to limit warming to well below 2 degrees above pre-industrial levels.
Most efforts are focused on cutting or eliminating thermal coal, a key ingredient for coal-fired power plants, which its critics argue can be replaced by gas or cheap renewable energy sources.
The world’s largest fund manager, BlackRock, said in January it will ditch investments including thermal coal as part of a response to mounting climate change concerns.
The fund management giant joined the Climate Action 100+ initiative earlier in January, which controls $US32 trillion ($45 trillion) in global investment and is backed by major Australian superannuation funds flexing their power to hold companies to account and improve their environmental performance.
BlackRock named Australia among countries where investors are asking how they should change their portfolios to reflect increasing climate risk.
Westpac will withdraw all support for the thermal coal industry by 2030, joining NAB and CBA, and has pledged to develop Paris-aligned financing strategies for emissions-intensive sectors.
AGL and BHP were behind the times, the Australasian Centre for Corporate Responsibility said.
“Sophisticated investors like the Norwegian sovereign wealth fund look past the feel-good advertising and flimsy climate commitments of companies like AGL and BHP, and see that coal businesses have no future,” ACCR executive director Brynn O’Brien said.
AGL has pledged to close its coal plants by 2050, invest in renewables and improve the efficiency of its gas operations.
BHP boss Mike Henry said the miner is focused on balancing its role as both a major commodity producer with emissions concerns.
“We recognise the longer-term role that fossil fuels will continue to play, but we also recognise the risks associated with climate change, and we have been taking action on this for decades,” Mr Henry told a mining conference on Tuesday.
BHP will issue a “science-based” 2030 target for its operating emissions later this year in addition to its $US400m climate investment pledge made by former leader Andrew Mackenzie.
“We will also come out later in the year with updated portfolio analysis to include a well below two degrees scenario, and we are strengthening the link between climate performance and executive pay, so there is no change to our commitment to this,” Mr Henry said.
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