Through our engagement, we seek to encourage companies with exposure to coal to be proactive in how they will manage the transition and avoid the risks of stranded assets.
Our 2020 engagement focus was on thermal coal mined and used for power generation, and we centred our efforts with companies that are:
- Multinational miners, who influence global supply;
- Based in China, the largest coal producer and consumer in the world; and
- Based in the US, where we judged there to be significant scope for engagement progress.
2020 engagement with coal mining companies
The coal mining sector is generally not vertically integrated, meaning that companies have little control of the emissions resulting from coal combustion. This limits the options for the sector – in particular for pure-play coal miners – to successfully navigate shrinking demand as electrification and other alternatives take a larger share in the energy system. And while diversified miners may be able to enjoy the long-term demand increase of other metals and minerals, their energy transition journeys are not straightforward.
In 2020, we engaged with 3 diversified miners with coal exposure and 3 pure-play coal miners. All three of the diversified miners we engaged have coal phase-out commitments, but with very different strategies to achieve this. Our engagements with the coal pure-plays, in contrast, revealed that they are mostly in the early stages of dealing with climate change as a material business issue.
2020 engagement with electric utility companies
With the economics of renewable energy becoming ever more favourable, the opportunities for electric utility companies to diversify their businesses away from coal are more obvious than for coal miners. However, the sector still faces some complex challenges, particularly given the heavily regulated nature of electricity markets and the need to balance emissions control with reliability and affordability.
2021 will be a critical year for climate change, and we intend to intensify our engagement efforts in relation to coal phase-out. We will be looking to follow up with companies that have announced 2050 targets to press them on implementation, including setting a firm coal phase-out date. We will continue to prioritise China and the US, as the recent and upcoming policy changes create an urgent need for laggard companies to respond; we will also look to engage laggard companies in more challenging markets, including India.