BNP Paribas Asset Management has announced it will implement an enhanced coal-exclusion policy, accelerating its commitment to tackling climate change by divesting from the single largest source of carbon emissions.

The tighter exclusion policy on companies engaged in mining thermal coal and generating electricity from coal will come into effect at the start of 2020 and will apply to all of the company’s actively managed open-ended funds, as well as becoming the default policy for segregated mandates. The policy will exclude companies that derive more than 10 per cent of their revenue from mining thermal coal and/or account for 1 per cent or more of total global production.

Mark Lewis, global head of sustainability research, commented: “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. The main renewable technologies already compete favourably 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. The trend will continue as costs for all renewable technologies continue to fall.”

The policy represents a significant step towards the company’s 2025 target of aligning its portfolios with the Paris Agreement. It will also reduce the economic risk in portfolios as coal becomes increasingly uncompetitive as a fuel for power generation.

Whilst acknowledging the importance of encouraging companies to reduce their dependence on coal mining and coal-fired power generation the BNP will consider exceptions for companies making credible commitments to reducing their coal-based activities to levels consistent with the Paris Agreement within the required time frame.

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