Bushfires: Matt Canavan relaxed on BlackRock’s exit from coal

Resources Minister Matt Canavan has dismissed the decision of the world’s biggest fund manager to divest from thermal coal.

Resources Minister Matt Canavan. Picture: AAP

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 firm 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 invested $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.

It would also exit debt investments — such as bonds traded on global markets — of the same group of companies, Mr Fink said.

The latter decision is likely to make it far harder for thermal coal companies to build new mines, given that 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 coalminers, saying ­others would take its place.

“There is lots of capital in the world,’’ he said. “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.

“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.”

Asked about BlackRock’s decis­ion, Scott Morrison backed the ­future of coal while failing to specifically name the commodity. “The one you referred to is worth about $70bn in Australia and this is important to so many communities across the country,” the Prime Minister said.

“And so … our government’s plan is to meet and beat our emissions reductions targets, our plan is to ensure we do that without putting higher taxes on people, not putting up their electricity prices and not pulling the rug from regional­ communities that depend on our resources sector for their very livelihoods, and so we will continue to maintain a very focused­ and balanced approach.”

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. 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 coalminers 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, or 0.5 per cent of its stock, according to Bloomberg.

While Mr Fink said BlackRock intended 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 transporting 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 Minerals Council boss Gavin Lind said demand for Australian coal would continue, irrespective of the decision by investors.