With the number of financial institutions divesting from coal doubling between mid 2019 and the end of 2022, think-tank IEEFA says it is European companies that are leading the way.
The number of financial institutions that have pledged to divest from coal has surpassed 200, according to the Institute for Energy Economics and Financial Analysis.
It said that while it took six years for 101 companies in the sector to commit to coal divestment, it has taken just three years for that figure to double to exactly 202.
The research organisation noted in a report, however, that the world’s three largest asset managers — BlackRock, Vanguard and State Street Global Advisors — “have either formulated weak coal exit policies or have no policy at all”. Thirty-six asset managers or owners have formal coal divestment policies, it added.
“Interestingly, it’s not the largest asset managers who are leading the way,” said IEEFA debt markets leader for Asia Pacific Christina Ng.
“It’s more the medium-sized ones who recognise their duty to clients. This is a reflection that the market is learning and learning fast amid regulators getting tough on greenwashing.”
Europe leads the way
European financial institutions make up the majority of those around the world with clear coal divestment policies, with 114 commitments recorded by the IEEFA. The body recorded 53 policies in the Asia-Pacific region.
Asia specifically has recorded a rapid increase in the number of divestment policies of late, rising to 41 from just 10 between 2013 and April 2019.
A surge in coal divestment pledges in emerging economies, including South Africa, China and India, was also observed, despite their heavy reliance on coal for electricity.
While 27 North American financial institutions have explicit coal divestment policies, a rise in anti-ESG sentiment may make exclusion more challenging in certain parts of the US. Earlier in May, Florida governor Ron DeSantis signed a bill banning government investments from considering ESG.
The IEEFA registered 36 asset managers and owners with coal divestment policies, covering more than $50bn in assets under management.
It took aim, however, at BlackRock, Vanguard and State Street, which together manage assets worth more than $20tn. In March, BlackRock chief executive Larry Fink said that “it is not the role of an asset manager like BlackRock to engineer a particular outcome in the economy”.
“As I have said consistently over many years now, it is for governments to make policy and enact legislation, and not for companies, including asset managers, to be the environmental police,” he added.
It’s more the medium-sized ones who recognise their duty to clients. This is a reflection that the market is learning and learning fast amid regulators getting tough on greenwashing
Christina Ng, IEEFA
A BlackRock spokesperson said: “The money we manage belongs to our clients, many of whom make their own asset allocation and portfolio construction decisions. We do not commit to moving our clients’ assets to reach certain targets, unless our clients explicitly ask us to do so.”
BlackRock added that for active portfolios where its clients have granted the company investment discretion, it decided in 2020 to divest from public debt and equities in companies that generate more than a quarter of their revenue from thermal coal.
A Vanguard spokesperson said: “The assets we manage belong to the investors who have entrusted Vanguard to grow their savings over time.
“On behalf of the investors in Vanguard’s internally managed equity funds, Vanguard’s investment stewardship team engages with companies in carbon-intensive industries and their boards to understand how they identify, mitigate, oversee and disclose material risks, including material climate risks.
“We believe boards that are most effective in safeguarding long-term investors’ interests from material climate-related risks demonstrate relevant risk competence, robust oversight and mitigation of risks, and effective disclosure of material risks and related climate strategies.”
State Street declined to comment.