BNP Paribas Asset Management (BNPP AM), which manages €399 billion ($453.8 billion) in assets, said it plans to implement a new coal-exclusion policy that will come into effect at the start of next year and target companies that mine thermal coal and generate electricity from coal.
The policy will apply to all of the firm’s actively managed open-ended funds and will become the default policy for segregated mandates.
“From an investment perspective the outlook for the coal industry looks increasingly uncertain as less carbon-intensive fuel sources, in particular renewables, become ever more competitive,” Mark Lewis, global head of sustainability research at BNPP AM, said in a release.
“The main renewable technologies already compete favorably with fossil fuel power generation, and in the best locations for wind and solar globally, new build costs are actually below those of existing fossil-fuel plants.”
According to the new policy, the firm will exclude companies that derive more than 10% of their revenue from mining thermal coal and/or account for 1% or more of total global production. It said the global production limit will capture those companies whose share of revenue from coal is below 10%, but which still account for “a meaningful level of production.”
BNP will also exclude power generators whose carbon intensity is above the 2017 global average of 491 gCO2/kWh, and will lower this threshold to 327 gCO2/kWh by 2025 in order to fall in line with the International Energy Agency’s (IEA) Sustainable Development Scenario.
“BNPP AM acknowledges the importance of encouraging companies to reduce their dependence on coal mining and coal-fired power generation in order to align their activities with the Paris Agreement,” said the firm in announcing the new policy. “It will therefore consider exceptions for those miners and power generators that make credible commitments to reducing their coal-based activities to levels consistent with the Paris Agreement within the required time frame.”
The company said the credibility of commitments will be determined using quantitative and qualitative criteria, including disposal plans for coal assets or acquisition plans for lower-carbon generation capacity. Exemptions will be granted on a half-yearly basis, with companies demonstrating their commitment to the policy expected to comply within two years.
“Coal combustion is the largest single source of global warming, while the power sector itself is the largest single source of coal combustion,” said BNP. “Reducing emissions from coal is therefore the most effective way of moving towards an energy system consistent with the Paris Agreement.”