Coal Seen as New Tobacco Sparking Investor Backlash: Commodities – by Jesse Riseborough & Thomas Biesheuvel (Bloomberg News – November 20, 2013)

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.”

No Retreat

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.”

Rising Concern

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.”

Coal remains a “good story” with demand from China and India estimated to grow almost 4 percent a year through to 2020, Godfrey Gomwe, chief executive officer of Anglo American (AAL)’s thermal coal unit, said in e-mailed comments.

“We believe that fossil fuels will continue to play a significant role in the global energy mix,” Ivan Glasenberg, CEO of Glencore Xstrata, wrote in the company’s sustainability report last week.

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