Still Dirty, Still Dangerous

 Still Dirty,
Still Dangerous
The Norwegian Government Pension Fund’s
Investments in the Coal Industry
Published by urgewald, Framtiden i våre hender and Greenpeace Norway
Author: Heffa Schücking
urgewald
Germany
www.urgewald.org
Ph. +49 2583 304 920
Heffa Schücking:
[email protected]
Framtiden i våre hender / Future in our hands
www.framtiden.no
Ph: +47 22 03 31 50
Pia A. Gaarder:
[email protected]
Sigurd Jorde:
[email protected]
Greenpeace Norway
www.greenpeace.org/norway/no
Ph: +47 90 107 904
Truls Gulowsen:
[email protected]
Thanks for research to: Katrin Ganswindt, Christina Beberdick, Nils Bartsch, Nick Ebner,
Jonas Gardlo, Maike Schmoch, Simon Bau
For more information please contact: [email protected]
We would like to thank the following for their support:
grassroots foundation, Goldman Environmental Prize and Olin gGmbH
Introduction
Over the past two years, a discussion has sprung up in Norway about a possible
divestment of the Government Pension Fund Global from the coal industry. While the
Norwegian government opposes such a step, a recent opinion poll shows that 63% of
Norwegians are in favour of excluding coal from the Pension Fund’s investments.1 This
briefing paper aims to contribute to the debate and provides an overview of the Pension
Fund’s current coal investments. It is an update to the study “Dirty & Dangerous”, which
was published in 2014 by urgewald, Framtiden i våre hender (the Future in our Hands) and
Greenpeace Norway.2
Background
While Norwegians are quick to point out that their country is small, its Government
Pension Fund (GPF) is the largest sovereign wealth fund in the world. As its capital stems
from the country’s petroleum revenues, the GPF is commonly referred to as the “oil fund”
(Oljefondet) in Norway. Since 2008, the value of the GPF has tripled and now lies at NOK
7,012 billion (€ 837 billion), making it one of the world’s largest investors.3 While only a
small percentage of the GPF’s holdings are in the coal sector, these nonetheless place the
Pension Fund among the world’s top ten investors in the global coal industry.
Why Divest from Coal?
The answer is simple: Coal is the number one source of the CO2 emissions heating up our
planet. Coal emits more CO2 than oil and more than twice as much as natural gas per unit
of energy produced.4 Investing proceeds that originate from the oil industry into an even
more carbon-intensive fuel is therefore a sure-fire recipe for accelerating climate change.
More than 3/5th of the rise in global CO2 emissions since 2000 is due to the burning of
coal.5
Although the International Energy Agency (IEA) warns that global coal consumption must –
at the very latest – peak by 2020, the coal industry still continues to expand.6 Over 1,100
GW of new coal-fired power plants are currently planned or under construction7 – this is
more than 3 times the size of the United States’ current coal fleet. If these plans become
reality, they will undermine all chances of limiting global warming to 2°C.
While hopes are high that the Paris climate summit in December 2015 could usher in a
new and binding climate agreement to limit greenhouse gas emissions, the reality is that
government action by itself will not be enough. Investors must also change course. As the
1
http://www.greenpeace.org/norway/no/nyheter/2015/To-­‐av-­‐tre-­‐krever-­‐Oljefondet-­‐ut-­‐av-­‐kull-­‐og-­‐kullkraft/ https://www.urgewald.org/sites/default/files/dirty_and_dangerous_coal_gpf.pdf 3
Market value of the GPF on March 31, 2015. 4
„Understanding CO2 Emissions from the Global Energy Sector,“ World Bank, 2014 5
Launch of the Medium-­‐Term Coal Market Report 2013, IEA, December 16, 2013 6
See the 450 Scenario in „Redrawing The Energy-­‐Climate Map,“ IEA, 2013 7
„Boom and Bust – Tracking the Global Coal Plant Pipeline,“ Coalswarm and Sierra Club, March 2015 2
fifth IPCC report says: “Emission patterns that limit temperature increase to no more than
2°C require considerably different patterns of investment.”8
While the Norwegian government has been one of the leading proponents for a
comprehensive and legally binding climate agreement, it has failed to connect the dots
when it comes to the country’s sovereign wealth fund. The tens of billions of kroner the
GPF has sunk into the coal industry make it one of the investment giants in a sector that
must urgently be scaled back if we want to avoid catastrophic climate change. Divesting
from this industry is thus the most crucial and powerful step Norway can take in the leadup to Paris.
“Pretend” Divestment versus Real Divestment
In our previous report, “Dirty & Dangerous” we put forward 5 criteria for eliminating the
most harmful parts of the coal sector from the GPF’s investment universe. These criteria
were conservative and only included companies that either play a significant role in the
coal sector, whose largest business segment is devoted to mining or burning coal or that
have ambitious plans to expand their coal business. Based on these criteria, we identified
158 coal companies in the GPF’s holdings and total coal investments of NOK 82.6 billion at
the end of 2013.9
In February 2015, when the GPF’s manager, Norges Bank Investment Management (NBIM)
issued its “Responsible Investment” report, we were therefore pleased to see a chapter
highlighting the Pension Fund’s divestment from a number of coal companies. This
information was reported by the press under headlines such as “Oil fund sells out of 49
companies due to sustainability concerns” (The Norway Post) or “World’s biggest
sovereign wealth fund dumps dozens of coal companies” (The Guardian).10 And in April
2015, the Norwegian Finance Ministry stated on its webpage: “The Bank has in recent
years made more than a hundred risk-based divestments, including holdings in coal
extraction and coal power companies.” These statements created the impression that
things were moving in the right direction.
When we analysed the GPF’s 2014 holdings list (published in March 2015), we found it
had, indeed, divested from 51 coal companies in 2014. The total sum of its coal industry
holdings has, however, grown and now amounts to NOK 85.8 billion, an increase of over 3
billion kroner, when compared to 2013. This shows the shortcomings of reports that focus
only on divestment actions, but do not mention where funds have been re-invested. They
serve to create the illusion that the Pension Fund’s coal portfolio has shrunken, while
resources have, in fact, only been shifted from one coal company to the next.
8
„5th Assessment Report, Chapter 16: Cross-­‐cutting Investment and Finance Issues“, IPCC, 2014 This is likely still an underestimation as our analysis did not cover specialized coal equipment and coal transportation companies, and because it is reasonable to assume that we overlooked at least some investments that should have been part of this sample. 10
Both of the cited articles were published on February 5, 2015 9
The Pension Fund’s Portfolio in 2014
This section analyses some of the GPF’s largest regional coal investments as well as the
overall changes that took place in its coal portfolio from 2013 to 2014.
India
Most striking is perhaps the Pension Fund’s divestment of around NOK 840 million from 13
Indian coal companies. 44% of this sum (NOK 366 million) was, however, re-invested into
India’s Reliance Group. Reliance Power is one of the biggest developers of coal-fired
power plants in South Asia and is therefore on the exclusion list of KLP, Norway’s largest
private pension fund. Reliance has around 12,000 MW of new coal-fired power capacity
under construction and is also developing India’s largest coal block with reserves of over 1
billion tons. In addition, its subsidiary, Reliance Coal Resources Limited, is developing 3
coal mines in Indonesia.11 As NBIM shed investments in Indonesian coal companies in
2013, due to their role in the rampant destruction of Indonesia’s rainforests, investing into
the Reliance Group seems particularly ill advised. But this investment is also controversial
for other reasons. A 2014 NGO fact-finding mission to Reliance’s Sasan power plant
reported serious environmental and human rights violations,12 such as the following:
- Contamination from ash ponds has poisoned villager’s drinking water.
- Residents who protested against their relocation for the power plant were abducted and
never found.
- Houses of local villagers were bulldozed in the middle of the night to force them to give
up their land.
- Deadly accidents of workers were hushed up and records were falsified to hide the fact
that they had died on site.
Reliance is just one of many “irresponsible investments” not mentioned in NBIM’s report.
China:
While there was a net decrease of almost NOK 364 million in the GPF’s Indian coal
portfolio, the Pension Fund’s investments in the Chinese coal sector grew by over NOK 1.7
billion. The GPF’s Chinese coal holdings now amount to NOK 7.2 billion in total, an
increase of 32% in comparison to 2013.
From a climate perspective, investing in the Chinese coal sector seems a disastrous
choice. China is already responsible for around 20% of the world’s CO2 emissions, and is
still expanding its coal-fired power capacity at a breath-taking rate.13 In 2014, China
11
http://www.reliancepower.co.in/business_areas/fuel_business/coal_mines_in_indonesia/factsheet.htm „The US Export-­‐Import Bank’s Dirty Dollars,“ Sierra Club, 350.org, Carbon Market Watch, Pacific Environment and Friends of the Earth US, October 2014 13
„Can China Cut Coal?,“ Scientific American, November 25, 2014 12
brought 3 coal-fired power plants on line each month.14 The Norwegian Government
argues that the Pension Fund should not be used a “climate tool”, but its investments in
the Chinese coal sector are arguably a “climate change tool”.
Photo: Chang Qiang/Imaginechina
The GPF is invested in 21 Chinese companies that mine or burn coal or convert it to gas (an
incredibly polluting process that creates more CO2 than if the coal were simply burned). If
we add up the annual coal consumption of the 11 Chinese utilities and coal-to-gascompanies in the GPF’s portfolio, we see that they collectively burn around 424 million
tons of coal annually. Burning this amount of coal creates CO2 emissions that are 19 times
as high as Norway’s total annual greenhouse gas emissions!15 And if we add up the
expansion plans of the Chinese utilities in which the GPF hold shares, they amount to a
staggering 134,000 MW of additional coal-fired capacity. The inconvenient truth is that
Norway’s and everyone else’s future is being undercut by such investments.
According to Norwegian Finance Minister Siv Jensen, “Active ownership and dialogue shall
remain the key tools for addressing climate issues in the management of the fund.”16 One
doesn’t have to be an expert in international affairs to realize that this strategy will have
no impact whatsoever on Chinese coal companies.
14
„New Coal Power Plants in China – a Carbon Bubble Waiting to Burst,“ Lauri Myllyvirta, Greenpeace, February 2015 15
Burning 21.5 million tons of bituminous coal generates CO2 emissions as high as Noway’s total greenhouse gas emissions. These amounted to 52.8 Mt CO2 equivalent in 2013. 16
Webpage of the Norwegian Finance Ministry, April 10, 2015 There are, of course, a multitude of other reasons why investments in the Chinese coal
sector can be considered dirty and dangerous, especially for people living in China. A 2014
study by researchers from Tsinhua and Peking universities found that coal pollution is
responsible for 670,000 premature deaths annually in China.17 The country’s coal industry
uses up vast amounts of water, and already accounts for over 15% of China’s annual water
withdrawals.18 This water grab leads to immense conflicts with rural populations who
depend upon scarce water resources for their livelihoods. Coal is therefore at the center of
many protests in China: Tibetans demonstrating against coal mining,19 Mongolian herders
trying to defend their water resources20 or urban residents protesting the construction of
new coal-fired power plants and chanting “Give me back my blue sky.”21
Japan:
In Japan, the GPF’s coal investments have grown by 21% in comparison to 2013. The
Pension Fund now has investments of over NOK 3.8 billion in Japanese coal-fired utilities
and coal mining companies like Electric Power Development Corporation (also called JPower) and Itochu. Japan has plans for 21,200 MW of new coal-fired capacity at home,22
and its companies are among the most active players when it comes to building new coalfired power plants in other countries.
One of these countries is Indonesia, where Itochu and J-Power are planning to build one of
Asia’s largest coal-fired power plants, the 2,000 MW Batang coal project in Central Java.
For 5 years now, thousands of Batang residents have protested against this power plant,
as it would destroy rich fishing grounds and one of Java’s most productive agricultural
areas.23 Their peaceful protests have been met with a wave of threats and violence,
culminating in attacks on local landowners by the army, police and hired thugs to force
them to relinquish their lands. Indonesia’s National Human Rights Commission and the
country’s Environment Minister have recommended that the project be scrapped, but
Indonesia’s President has promised Itochu and J-Power that he will deliver the Batang
project into their hands.24
Although the International Energy Agency has warned that the rapid expansion of
Indonesia’s coal-fired power capacity is threatening the country’s climate goals, this
hasn’t stopped the GPF from investing in companies that are at the forefront of this
expansion.25 And the additional coal demand of these power stations will make it even
harder to protect Indonesia’s remaining rainforests from being destroyed for coal mining.
17
Reported in „China’s Lethal Coal Dependency: 670,000 Deaths linked to Air Pollution in 2012,“ Lindsay Abrams, November 2014 18
„The Water-­‐Related Challenges of China’s Coal and Power Industries,“ HSBC, June 2013 19
„Tibetans Protest Against Coal Mining in Nangchen County,“ Radi Free Asia, August 7, 2014 20
„In China’s Inner Mongolia, Mining Spells Misery for Traditional Herders,“ Washington Post, April 7, 2015 21
„10,000 Protest In Chinese City Over Planned Coal-­‐Fired Power Plant,“ South China Morning Post, April 13, 2015 22
„Immediate Action Must be brought to New and Existing Japanese Coal-­‐Fired Power Plants,“ KIKO Network, April 9, 2015 23
„Activists Call on Jokowi to Extend Forest Moratorium,“ Jakarta Globe, March 23, 2015 24
„Indonesia’s Widodo Stakes Can-­‐Do Image on Overdue Power Plant,“ Bloomberg, March 24, 2015 25
„Dash for Coal Threatens Indonesia Climate Goal, Warns IEA,“ RTCC, February 18, 2015 Photo: Greenpeace
USA
In 2014, NBIM shed most of the GPF’s investments in U.S. coal mining companies, citing in
at least two cases their involvement in “mountaintop removal”, an especially barbaric
mining practice that destroys entire mountain ranges in Appalachia. Little was won by this
divestment, however, as NBIM simultaneously upped the Pension Fund’s stakes in
companies like FirstEnergy and Duke Energy, that are among the main buyers of
mountaintop removal coal.
While NOK 80 million was divested from coal mining, the GPF’s investments in coal-based
utilities in the U.S. grew enormously and now total NOK 20.6 billion.26 Among the Pension
Fund’s investments are 8 of the ten top coal-burners in the United States, also known as
the “Filthy Ten”. Together, the 13 coal-based U.S. utilities in the GPF’s portfolio burn 335
million tons of coal annually, an amount that generates CO2 emissions 15 times as high as
Norway’s own.
One of the GPF’s biggest investments – NOK 5.2 billion – is in Duke Energy, a company
that is charged with numerous criminal violations by federal prosecutors and is among the
worst polluters in the Unites States.27 Environmental organizations were already suing
Duke Energy for the negligent handling of its waste, when in February 2014, 40,000 tons
of coal ash from one of Duke’s coal-fired power stations spilled into North Carolina’s Dan
River. For 70 miles the river was coated with toxic gray sludge from 60 years of burning
coal.
26
Some of this growth is due to an increase in ownership of individual companies, but changes in the exchange rate between US$ and NOK were also a significant factor. 27
„Duke Energy is Charged in Huge Coal Ash Leak,“ New York Times, February 20, 2015 This is what a coal ash spill looks like. Photo: Amy Adams
Coal ash is the waste material left after coal is burned. It contains arsenic, mercury, lead,
thallium, chromium and many other heavy metals that pose grave risks to human health.
When released into the environment, these substances can cause cancer, neurological
damage, heart and lung diseases, kidney disease, reproductive problems, birth defects,
asthma and many other illnesses. Every year, coal-fired power stations in the U.S.
generate 140 million tons of coal ash, making it the largest industrial waste stream in the
United States.
The coal ash spill into the Dan River was symptomatic for Duke Energy’s negligent
handling of waste from its coal-fired power plants. The company simply dumps much of its
coal ash in un-lined earthen pits next to waterways, and as Frank Holleman from the
Southern Environmental Law Center, says: “You don’t have to be a rocket scientist to
figure out if you dig an unlined hole in the earth next to a river, and you put toxic
substances in it, that these will leak.”28 Duke Energy stores more than 150 million tons of
coal ash in 32 dumps in North Carolina, and according to State environmental officials, all
of Duke’s unlined waste pits are contaminating groundwater at these sites.29 The company
estimates that cleaning up its coal ash sites in North Carolina alone can cost up to US$ 10
billion.30
Unfortunately, Duke Energy is not alone when it comes to this deplorable practice. In total,
there are over 1,400 unlined coal ash ponds in the US. While they virtually all leak, many
28
www.cbsnews.com/news/duke-­‐energy-­‐on-­‐coal-­‐ash-­‐waste-­‐at-­‐dan-­‐river/ „More People Near Coal Ash Pits told Not to Drink their Water,“ AP, May 6, 2015 30
http://www.wral.com/duke-­‐energy-­‐sets-­‐aside-­‐3-­‐4b-­‐for-­‐coal-­‐ash-­‐cleanup/14156502/ 29
have also been rated as structurally unsafe and are at high risk of causing new spills.
Among the owners of these ash ponds are Ameren, Dominion Resources, PPL and several
other utilities the GPF is invested in.31
Investments in European Lignite Companies
Lignite, also known as “brown coal”, is a low-grade coal that results in the highest CO2
emissions per unit of energy generated. Brown coal is the fuel that is most damaging to
our climate. This has, however, not stopped the Norwegian Government Pension Fund
from investing NOK 4.1 billion in major lignite miners and burners, such as PGE and Tauron
Polska in Poland, CEZ in the Czech Republic, RWE in Germany and Sweden’s Vattenfall
(which has huge lignite operations in Germany). Almost ¼ of the world’s annual
production of lignite is mined and burned by these companies.
According to the European Union, the Bełchatów power station owned by PGE is Europe’s
dirtiest power plant. Bełchatów alone emits over 37 million tons of CO2 annually, an
amount that equals 70% of Norway’s total greenhouse gas emissions per year.32 The
company RWE has long been Europe’s largest CO2 emitter and its annual CO2 output is 3
times higher than Norway’s.
Protest against coal pollution in Poland. Photo: Mateusz Wojton
But lignite is also controversial because of the enormous scale of destruction its mining
operations entail. Huge bucket-wheel excavators strip away the soil, turning hundreds of
square kilometers of fertile farmland into desolate wasteland. In Germany alone, over
31
„Dangerous Waters: America’s Coal Ash Crisis,“ Sierra Club and Earthjustice, May 2014 „Europe’s Dirty 30 – How the EU’s Coal-­‐Fired Power Plants are Undermining its Climate Efforts,“ CAN, 2014 32
110,000 people have been displaced for lignite strip mines. And the German term
“Ewigkeitskosten” (“eternity costs”) aptly describes the irreparable damage these mines
impose on the landscape and water tables of the affected regions.
The impacts of the German utilities in which the Pension Fund holds stakes, however, go
beyond lignite mining in Europe. RWE and E.ON are among Europe’s largest importers of
hard coal from countries like Colombia and South Africa, where coal mining has severe
impacts on local communities’ access to water. E.ON and RWE also source coal from
Appalachia in the U.S. where entire mountaintops are blown up, an especially
controversial mining method that would be termed illegal in Norway and the rest of
Europe.
Although Germany is known as the country of the energy transition and over one quarter
of the country’s electricity production now stems from renewables, the large utilities in
which the GPF holds stakes have actively opposed this transition. A case in point is RWE,
which still has less than 5% renewables in its energy mix and is ill positioned to compete
in the new energy market. Accordingly, the company’s share price has dropped by 75%
since 2007.
Vattenfall´s lignite mine in Jaenschwalde, Germany. Photo: Daniel Rosenthal / Greenpeace
Multinational Miners
The GPF currently has investments of NOK 27 billion in the 3 big multinational mining
companies Glencore, BHP Billiton and Anglo American. While these are diversified
companies for which coal only accounts for 10 – 20% of their earnings, they nonetheless
play a central role in global coal production. Collectively, these 3 companies produce 364
million tons of coal annually, and when burned, this coal generates CO2 emissions that are
over 16 times as high as Norway’s annual greenhouse gas emissions.
In early February 2015, NBIM sent a letter to the 3 multinational miners emphasizing
climate concerns and asking them to consider divesting their coal assets. As subsequent
public statements by the companies indicate, this letter had little or no impact.
In March 2015, BHP Billiton CEO Andrew Mackenzie lashed out publically at the oil and gas
industry, telling it to stop claiming to be better for the climate than coal,33 and in the same
month, Anglo American stated in its annual report: “The demand for coal is forecast to
continue to grow – a demand which has to be met – and we believe that responsible
mining companies, such as Anglo American, need to be part of the solution.” According to
the long-term perspective laid out in its report, Anglo American, in fact, aims to triple its
earnings from coal in the future.34
The Cerrejon coal mine. Photo: Steve Morgan / Greenpeace
These companies don’t care what NBIM, or, for that matter, what the UN’s
Intergovernmental Panel on Climate Change (IPCC ) says. The latest IPCC report – a
document approved by 195 governments – warns that 80% of coal reserves must stay in
the ground if we want to limit global warming to 2°C. But as Ivan Glasenberg, CEO of
Glencore bluntly stated in April 2015: “…we do not believe that the global energy reality
will economically support carbon measures that would prevent us from fully utilizing our
fossil fuel reserves.”35 Which is just a polite way of saying: Screw the Paris climate
33
BHP Chief: Stop Saying Gas is Cleaner than Coal,“ Financial Times, March 22, 2015 Annual Report 2014, Anglo American, March 2015 35
„Biggest Coal Exporter Says Climate Change Won’t Strand Assets,“ Bloomberg, April 28, 2015 34
negotiations; we are certain we’ll get to mine and sell all the black stuff we want. This is
why the multinational miners still have plans to expand their coal output and spend
millions each year exploring for new coal reserves. Should Norway’s sovereign wealth
fund really be invested in companies that are betting against effective climate
regulations?
The appalling impacts of Glencore’s, BHP Billiton’s and Anglo American’s coal operations
are nowhere more evident than in the Province La Guajira in the north of Colombia. Here
the 3 companies jointly operate the Cerrejón mine, Latin America’s largest coal mine. For
the Wayuu Indians and the Afro-Colombian communities who live here, the mine is like an
insatiable monster. It has taken over tens of thousands of hectares of fertile land,
destroying farms, water sources and towns. The Ranchería River which served many
communities with drinking water, turned foul and brown with toxic run-off from mining.
There is coal dust everywhere including in people’s lungs and widespread contamination
of water, air and soils. Thirst and hunger have become a fact of life here: 50% of Wayuu
children are severely undernourished and childhood mortality is high.36 “The mine is
stealing our future,” says Oscar Guayiru, one of the leaders of the Wayuu communities.
The GPF’s Coal Portfolio as a Whole
The figures NBIM presented to the Finance Committee of the Norwegian Parliament on
May 4th 2015 indicate that the GPF’s investments in coal mining are only around NOK 500
million, an almost negligible amount.37 However, as we pointed out in “Dirty &
Dangerous”, the definitions NBIM uses to measure coal mining investments are so narrow
that they exclude many of the largest coal producers in the GPF’s portfolio. The Pension
Fund, for example, holds investments of almost NOK 2.5 billion in RWE, a company that
produces over 100 million tons of lignite annually, making it the world’s largest lignite
producer. As RWE is a utility and happens to also burn the coal it mines, the company
doesn’t show up in this calculation. The same goes for South Africa’s Sasol. Although
Sasol’s feedstock is coal and the company mines over 40 million tons a year, it is
classified as an oil company by NBIM in the GPF’s holdings.
The picture is therefore very different, when one simply asks how much coal do the
companies produce that the GPF is invested in. The answer is 1.8 billion tons, which is
equal to 23% of world coal production.38 This is a much more substantial number than
NBIM’s figures would suggest and clearly shows that the GPF is still a significant investor
in coal mining. That being said, we do see a large reduction in comparison to the 2013
holdings, when the GPF was invested in companies that collectively accounted for 42% of
the world’s coal production.
Although many coal mining assets were shed in 2014, this has not led to an overall
decrease of the GPF’s holdings in the coal industry. Instead, investments were simply
36
“La carta de una escritora Wayúu a Santos,“ El Espectador, 13.4.2012 37
http://www.norges-­‐bank.no/pages/103220/040515_charts.pdf The World Coal Association estimated global coal production at 7.8 billion tons in 2013. 38
moved up one level in the coal chain: from mining to utilities and from extraction to
emissions.
Photo: Anthony Weller
From a climate perspective, this is clearly counter-productive. And what makes things
worse, is the fact that many companies in the GPF’s holdings are making massive
investments into new coal-fired power capacity, which will lock-in emissions for decades
to come. If Norway is serious about combatting climate change, its sovereign wealth fund
must stop investing in companies building new coal infrastructure that the world cannot
afford.
Resistance Against Coal
While the coal industry argues that coal is needed to provide energy to the poor in
emerging economies, the reality is that there is widespread popular resistance against
coal projects in both developed and developing countries.
In January 2015, after years of struggle, Chilean citizens’ movements celebrated the
suspension of plans by AES to build a coal-fired power station on Chile’s scenic Maules
coast.39 In the same month, plans for the 800 MW coal plant in Ploce, Croatia were
defeated after 90% of the city’s voters turned it down in a referendum.40 At a congress in
39
http://endcoal.org/2015/01/chao-­‐los-­‐robles-­‐chilean-­‐citizens-­‐movement-­‐celebrates-­‐coal-­‐plant-­‐victory/ „More than 90% say ‚No’ to Coal-­‐Fired Thermal Power Plant in Ploce,“ Dalje.com, January 26, 2015 40
Kolkata, India in February 2015, the world’s public health organizations called for a rapid
phase-out of coal to limit global warming and prevent illnesses and deaths associated
with air pollution.41 In March 2015, Mauritius’ Prime Minister cancelled plans for a coalfired power plant due to massive public opposition.42 In the same month, the
Environmental Impact Statement for a coal port and coal-fired power plant in Krabi
Thailand was rejected after 44,000 residents had spoken out against the projects in a
petition.43 In April 2015, thousands of Vietnamese risked arrest by blocking the country’s
main national highway for 30 hours to protest against pollution from the Vinh Tan coalfired power station.44 And in May 2015, 6,000 Burmese villagers and monks protested in
Ye township against plans by the company Toyo-Thai to build a coal-fired power plant in
their district.45 This was just days after a huge prayer rally led by 300 catholic priests
against the construction of a proposed coal power station in Batangas City in the
Philippines. Philippine Archbishop Ramon Arguelles nailed the issue in all of these
struggles, when he asked, “Why the need for a coal plant, when solar and wind energy
abound?”46
Protest against coal-fired power plants in Thailand. Photo: Athit Perawongmetha / Greenpeace
In April 2015, the Dutch development bank FMO, which specializes in emerging
41
„The Kolkata Call to Action,“ 14th World Congress on Public Health, February 15, 2015 http://endcoal.org/2015/03/victory-­‐coal-­‐power-­‐plant-­‐in-­‐mauritius-­‐canceled/ 43
„Krabi Coal Plant Environmental Impact Assessment Rejected,“ Phuket Gazette, March 14, 2015 44
„What Big Coal’s Happy-­‐Clappers Missed About Vietnam’s Growing Coal Headache,“ Reneweconomy, April 27, 2015 45
„No Coal, No Toyo-­‐Thai: Mon Villagers Rally Against Plant,“ Myanmar Times, May 6, 2015 46
„Batangas Priests Lead Fight vs Coal-­‐Fired Power Plant,“ Inquirer Southern Luzon, May 1, 2015 42
economies, announced that it will no longer finance any coal-fired power plants or coal
mining projects. In the explanation for its new policy, FMO writes: “Taking into account all
costs related to negative environmental and social impacts caused by mining, processing,
transportation and use, coal must be regarded as an expensive source of energy;
including all costs when calculating economic performance, many countries would show a
negative growth for years.”47
Investors Turning Against Coal
FMO’s decision is part of a turning tide against coal, with more and more financial
institutions, universities, churches, foundations, pension funds and private investors
blacklisting coal companies. In Norway, the first mover was the pension fund and insurer
Storebrand which divested 23 coal miners and coal-based utilities from its portfolio in
2013. It was soon followed by KLP, which manages pension funds from most of Norway’s
municipal employees. KLP’s step was even more significant as it set forward transparent
criteria (50% of revenues from coal) and committed to re-investing funds in the
renewables sector. In its statement KLP gives the following reasons: “(…) consumption of
coal – at today’s volumes – is not compatible with achievement of the 2-degree target.
Exclusion of coal companies as part of KLP's capital management strategy supports the
IPCC’s recommendations.”48 Next in line was the largest Nordic fund manager Nordea,
which announced in January 2015 that it would exclude companies with a “large and
sustained exposure to thermal coal mining”.49 And in March 2015, the city of Oslo became
the first capital in the world to divest from coal mining and coal power generation
companies. “We pull out of coal companies, because power production based on coal is
some of the most environmental damaging there is within the energy sector,” said Oslo’s
finance commissioner, Eirik Lae Solberg from the Conservative party. 50
Will the Norwegian Government Pension Fund be Next?
Not if Siv Jensen, Norway’s Finance Minister has her way. In April 2015, Jensen said, “I
have noted that the expert committee says the use of the fund as a climate political tool
will be both unfortunate and ineffective. The Government’s actions build on the broad
agreement of the fund as a financial investor, which has contributed to the robust and
long term management of our common assets.”51 This argument truly seems misplaced.
KLP and Storebrand are after all, also financial investors and not activists. And if divesting
from coal is a “political” action, then surely investing in coal is also a political action.
Jensen also fails to take note of the fact that many parts of the coal sector are not doing
well financially, and may do even worse in the long-term. As the Economist writes in its
issue of March 28th, 2015: “Growing energy efficiency, rising pollution worries and stiffer
competition from other fuels mean that in most countries the tide is turning against coal.
47
„FMO Position Statement on Coal-­‐Power Generation and Mining,“ April 2015 „Decision to Exclude from Investments,“ KLP, December 2014 49
„Nordea to Blacklist Coal Mining Companies,“ Financial Times, January 18, 2015 50
http://www.nrk.no/ostlandssendingen/oslo-­‐sier-­‐nei-­‐til-­‐kullkraft-­‐1.12233809 51
https://www.regjeringen.no/en/aktuelt/nytt-­‐klimakriterium-­‐for-­‐utelukkelse-­‐av-­‐selskaper/id2405205/ 48
Prices have been sliding, political opposition growing and demand drooping. The Dow
Jones Total Coal Market index has fallen by 76% in the past five years.”
Jensen argues that active ownership and engagement should be the primary tools to
address climate issues. For many companies in the GPF’s portfolio, this is, however, a
doomed strategy. Engaging with companies like Poland’s PGE, which generates 91% of its
electricity through coal-fired plants, or with American Electric Power, which produces 83%
of its power through firing coal, will lead nowhere. As an analogy: when the GPF took a
stance on tobacco, it excluded these companies, it didn’t first try to convince them to
begin peddling health food instead of cigarettes.
That being said, there is a place for engagement, but this strategy is only worth pursuing
in cases where companies have a limited exposure to the coal sector, and can conceivably
change without having to reorient a large share of their business. And it will only be
effective in cases where companies’ management is open to such change. The possibility
of exclusion therefore gives weight to what is otherwise a “toothless” engagement policy.
NBIM itself is also quick to acknowledge that engagement is a time-intensive process and
is – for capacity reasons – therefore limited to the larger investments in the GPF’s
holdings. To give just one example of how this plays out: In 2014, NBIM added the
Vietnamese company Pha Lai Thermal Power to the GPF’s holdings. As this investment is
relatively small and only amounts to about NOK 27 million, Pha Lai Thermal Power is
clearly not a case for engagement. From a climate perspective, the investment, however,
seems particularly bad. Vietnam is the third largest builder of coal-fired power plants
worldwide52 and 100% of Pha Lai Thermal Power’s business is coal.
There are quite a few of such small, but particularly destructive investments in the GPF’s
portfolio and they will continue to pile up, unless definitive exclusion criteria for the coal
sector is introduced.
Instead of opting for such a sector-based exclusion, the Norwegian government has
instead proposed a new criteria for the GPF’s ethical guidelines “to exclude companies
whose conduct to an unacceptable degree entail greenhouse gas emissions.” This is akin
to other conduct-based provisions in the ethical guidelines such as “serious human rights
violations” or “severe environmental damage”, which are purposely meant to only
exclude a small number of players. Accordingly, these two criteria have led to the
exclusion of only 16 companies over the past 10 years. The proposed new climate criteria
would thus also exclude only a small number of companies, and fails to address the fact
that the coal industry as such is the biggest contributor to global greenhouse gas
emissions.
Without a more far-reaching sector-based exclusion, the Pension Fund will continue to be
what it is now: One of the largest asset-holders of the global coal industry.
52
„Boom and Bust,“ Coalswarm and Sierra Club, March 2015 Divestment is Not Difficult
The good news is that divesting from coal is not difficult. In “Dirty & Dangerous”, we put
forward 5 criteria that would exclude the most harmful parts of the coal industry from the
GPF’s holdings. In our view, companies should be excluded if:
1) 30% or more of their business is coal-related.
2) in the case of utilities, over 30% of their power production is coal-fired.
3) they produce more than 22 million tons of coal annually. Burning this amount of coal
generates CO2 emissions that are as high as Norway’s annual greenhouse gas emissions.
4) they are involved in particularly damaging activities like mountaintop removal, coal-toliquids and coal-to-gas. The latter two technologies are more CO2 intensive than any other
part of the coal sector.
5) they are building new capacity for coal production or coal power. As Christiana
Figueres, the Executive Secretary of the UNFCCC says,” The science is very clear, there is
no space for any new coal.”53
These criteria embody a common-sense approach, and are by no means radical. According
to our analysis, implementing these criteria would lead to the divestment of 114
companies with an investment value of NOK 85.8 billion, which is equal to little more than
1% of the Pension Fund’s total holdings.
In the course of our research, we identified 70 additional companies that have some coalrelated business, but stay beneath the thresholds defined in the above criteria. These
companies are prime candidates for an engagement strategy. Ideally, they would be put
on a “watch list” so that NBIM can react accordingly if their business shifts more strongly
towards coal.
Time for a Change
Each step in the coal chain from mining through combustion to waste disposal has a dire
impact on the environment, human health and the communities living near mines, power
plants and waste areas. Coal investments bolster an industry that disrupts ecosystems,
contaminates water supplies, shortens lives and emits more greenhouse gases than our
climate can handle.
This industry is at odds with the values embraced by Norwegian society and nearly 2/3 of
Norwegians are ready for a change. According to an opinion poll commissioned by
Greenpeace in April 2015, 62% of the population supports a divestment from coal, 23%
disagree, while 15 % have not made up their mind.54 The public’s opinion is mirrored in the
Norwegian Parliament, where 5 parties that together hold a majority, have stated their
wish to pull the Pension Fund out of coal companies.
53
Quoted in ”Australia will Have to Move Away from Coal, UN Climate Head Says,“ Sydney Herald, May 7, 2015 http://www.greenpeace.org/norway/no/nyheter/2015/To-­‐av-­‐tre-­‐krever-­‐Oljefondet-­‐ut-­‐av-­‐kull-­‐og-­‐kullkraft/ 54
Suspense is therefore building whether a majority in the Norwegian Parliament will seize
the moment to turn this wish into reality on June 5th 2015. Norway may be a small
country, but it can lead the world by moving away from investments that jeopardize
everyone’s future.
Investment is
all about the future.
Child from the small island state Kiribati. Photo: Caroline Penn