Blackrock dumps thermal coal miners, Whitehaven share price drops

The share prices of coal miners like Whitehaven Coal Ltd (ASX:WHC) dropped after investment giant Blackrock dumped coal miners.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The share prices of ASX coal miners dropped today after Blackrock said it was going to exit thermal coal miners.

The Whitehaven Coal Ltd (ASX: WHC) share price fell almost 2% and the New Hope Corporation Limited (ASX: NHC) share price declined by 0.5%.

Blackrock is the world's largest investment manager with almost US$7 trillion of assets under management (AUM) at September 2019.

The asset manager said that it would exit thermal coal producers within its US$1.8 trillion active AUM. Indeed, Blackrock said:

"Thermal coal is significantly carbon intensive, becoming less and less economically viable, and highly exposed to regulation because of its environmental impacts. With the acceleration of the global energy transition, we do not believe that the long-term economic or investment rationale justifies continued investment in this sector. As a result, we are in the process of removing from our discretionary active investment portfolios the public securities (both debt and equity) of companies that generate more than 25% of their revenues from thermal coal production, which we aim to accomplish by the middle of 2020. As part of our process of evaluating sectors with high ESG risk, we will also closely scrutinize other businesses that are heavily reliant on thermal coal as an input, in order to understand whether they are effectively transitioning away from this reliance. In addition, BlackRock's alternatives business will make no future direct investments in companies that generate more than 25% of their revenues from thermal coal production."

It has been pointed out many times that one shareholder selling shares to another investor doesn't change or hurt the operations of the coal miner (or any other business). However, increasing the number of sellers and removing buyers from the market for coal miners does hurt the share price, and therefore hurts the remaining shareholders. More active action on climate policy is being taken by miners like BHP Group Ltd (ASX: BHP).

In a letter to investors, Blackrock CEO Larry Fink said that climate risk is investment risk, calling on every government, company and shareholder to confront climate change. He also said that "We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them."

Mr Fink thinks that the global economy is on the edge of a fundamental reshaping of finance. He raised a number of questions about the future, writing:

"Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? What will happen to the 30-year mortgage – a key building block of finance – if lenders can't estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas? What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts?"

As you might expect, Australia's Prime Minister Scott Morrison leapt to the defence of coal miners again. He said that coal is worth $70 billion a year to the Australian economy. His government still plans to "meet and beat" the emissions reductions targets without "putting taxes on people, putting up electricity prices and pulling out the rug from regional communities who depend on the sector for their livelihoods."

Foolish takeaway

Coal mining is unlikely to exist in its current form in 50 years from now, but as long as there are countries and businesses wishing to buy coal (and no export bans) there will continue to be coal sent from Australia's shores in the foreseeable future. But, I wouldn't want to buy into a coal miner today because of the poor growth prospects.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

3 small-cap ASX healthcare shares 'with strong prospects'

Fund manager IML discusses why these 3 ASX healthcare shares are likely to rise in value.

Read more »

Magnifying glass on a rising interest rate graph.
Share Market News

Will the RBA finally cut interest rates next week?

Let's see what economists are saying about the central bank's meeting.

Read more »

A couple sits on a sofa, each clutching their heads in horror and disbelief, while looking at a laptop screen.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors endured a rough Friday to close the trading week today.

Read more »

a man wearing old fashioned aviator cap and goggles emerges from the top of a cannon pointed towards the sky. He is holding a phone and taking a selfie.
Broker Notes

7 ASX All Ords shares elevated to 'strong buy' status in October

The brokers turned bullish on these ASX companies last month.

Read more »

A businessman compares the growth trajectory of property versus shares.
Share Market News

How ASX shares vs. property performed in October

The national home value rose for the 21st consecutive month while the ASX 200 dipped.

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

The worst 3 ASX 200 stocks to buy and hold in October unmasked

You would have done well to avoid these three ASX 200 stocks in October.

Read more »

A female Woolworths customer leans on her shopping trolley as she rests her chin in her hand thinking about what to buy for dinner while also wondering why the Woolworths share price isn't doing as well as Coles recently
52-Week Lows

Why is the Woolworths share price at its lowest point since 2020?

We haven't seen Woolies shares this low since COVID.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why AFT, Amcor, Corporate Travel, and Macquarie shares are falling today

These shares are ending the week in the red. But why?

Read more »