Austria’s €2.4bn VBV-Vorsorgekasse (VBV VK) has become the latest asset owner to divest from coal companies on climate change grounds, working with Erste Asset Management (EAM) to exclude companies deriving 5% or more of revenues from coal mining from their responsible investment universe.
The criterion captured 30 companies, of which 26 were already excluded for other reasons related to their environmental, social or governance (ESG) performance, according to a spokesperson for the company.
Glencore, for example, was already blacklisted on human rights grounds. Anglo-American and South Africa’s African Rainbow Minerals are among the fresh exclusions, however.
The securities of companies falling foul of this criterion were sold at the end of 2015. This only affected EAM’s sustainable equity funds, according to a statement from EAM.
In addition to sustainable mutual funds, EAM manages a special sustainable equity fund and a number of bond funds for VBV VK, one of Austria’s mandatory severance pay provident funds.
The move to exclude investing in companies that mine coal comes after EAM and VBV VK signed the Montréal Carbon Pledge last year.
The Vorsorgekasse was the first Austrian institutional investor to do so.
Pledge signatories commit themselves to measuring and publishing the carbon footprint of their equity portfolios annually as part of efforts to contribute to the reduction of CO2 emissions.
Heinz Behacker, chief executive of VBV VK, said that the exclusion of companies in the business of coal mining “is how the two companies emphasise their pioneering role as institutional investors in Austria in the fight against climate change”.
VBV is also aiming to ramp up investment in renewable energy, it has said.
Large cuts in coal mining are “an indispensable milestone” in achieving global climate targets agreed at the UN conference in Paris in December (COP21), noted EAM.
A maximum of 10-20% of global coal reserves are estimated to be burnable if global warming is to be capped at 2° C, endorsed at COP21 as the largest temperature increase the planet could tolerate.
With climate change having risen up the investment and policy agenda over the past few years, EAM and the Vorsorgekasse are not the first to turn their back on coal mining companies.
Norway’s sovereign wealth fund, for example, already has a policy of not investing in companies that derive more than 30% of their revenue from coal-based activities. Compatriot asset owner KLP embraced the lower threshold in December, having previously applied a more lenient exclusion trigger of 50%.
Sweden’s AP2, meanwhile, carried out its first climate risk assessment in 2014, which led to the pension fund selling off holdings in 12 coal producers and eight oil and gas companies.
In December it announced that it is divesting its stake in 28 power utility stock because the companies were in the business of carbon-based electricity generation and did not have any convincing strategy for reducing their climate impact.