BNP Paribas Asset Management announces tighter exclusion policy on coal companies

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BNP Paribas Asset Management (‘BNPP AM’) announces its plan to implement an enhanced coal-exclusion policy, accelerating its commitment to tackle climate change by divesting from the single largest source of carbon emissions.

The tighter exclusion policy on companies engaged in mining thermal coal[1] and generating electricity from coal will come into effect at the start of 2020. It will apply to all of BNPP AM’s actively managed open-ended funds, as well as becoming the default policy for segregated mandates. The policy represents a significant step towards BNPP AM’s 2025 target of aligning its portfolios with the Paris Agreement goal of keeping temperature rises well below 2°C above pre-industrial levels.

It will also reduce the economic risk in portfolios as coal becomes increasingly uncompetitive as a fuel for power generation. BNPP AM 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.

The global production limit will capture those companies whose share of revenue from coal is below 10%, but which nonetheless account for a meaningful level of production on an absolute basis. Power generators whose carbon intensity is above the 2017 global average of 491 gCO 2 /kWh will also be excluded, with BNPP AM subsequently following the Paris-compliant trajectory for the sector as determined by the International Energy Agency (‘IEA’) in its Sustainable Development Scenario (‘SDS’).

[2] The IEA’s SDS requires power generators’ carbon intensity to fall to 327 gCO 2 /kWh by 2025, and BNPP AM will therefore demand that companies reduce their carbon intensity between 2020 and 2025 at a rate consistent with this, excluding those that fail to do so.

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.  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.

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