With a growing number of governments setting paths to net zero emissions, the future of coal is in question. It’s estimated that coal use would have to drop by 60% by 2030 to achieve a net zero future.1
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
Let’s talk about risk
The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.
Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.
The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.