Coal miners running on borrowed time

Norway's sovereign fund sells out of coal miners

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published February 9, 2015 3:38 pm AEDT

In a further sign that coal miners have passed their use-by date, Norway's sovereign wealth fund has sold off 32 coal miners from its portfolio.

Norway's Government Pension Fund Global (GPFG), worth more than A$1.1 trillion, revealed last week that it sold out of 32 coal mining companies in 2014 because of risks from regulatory action on climate change.

Another 8 were sold out of due to greenhouse gas emissions, along with 5 tar sand producers, 2 cement companies and one coal-based electricity generator. An additional 16 coal miners were dumped because of links to deforestation, as well as two US coal companies involved in mountain-top removal.

It's a growing trend worldwide, with an estimated US$50 billion in fossil fuel company stocks being divested by 180 organisations around the world, according to The Guardian. The University of Sydney is the latest to join the movement, reported by Fairfax Media to be cutting heavy polluters and some fossil fuel companies from its $413 million portfolio.

Last year there was a huge outcry after the Australian National University dropped $16 million worth of shares in seven resources companies from its $1 billion portfolio, after guidance from a consultancy noted that they failed to meet responsible investing guidelines. Those companies included oil and gas producer Santos Ltd (ASX: STO), copper and gold producer Sandfire Resources Ltd (ASX: SFR) and Oil Search Limited (ASX: OSH).

Clearly, the moves by fund managers to reduce their fossil fuel and carbon emitting profiles is not just as a concern for climate change, but to reduce investment risk. As Marthe Skaar told The Guardian, "Our risk-based approach means that we exit sectors and areas where we see elevated levels of risk to our investments in the long term."

While many will point to ongoing demand for coal as one of the cheapest means of generating electricity and the rise of developing nations and their likely demand for coal, Chinese coal production fell for the first time in 2014.

Investors in ASX-listed coal miners such as Whitehaven Coal Limited (ASX: WHC), New Hope Corporation Limited (ASX: NHC), Cockatoo Coal Limited (ASX: COK) as well as BHP Billiton Limited (ASX: BHP), you have been warned.

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