From Citi:
There is considerable international media reporting of the upcoming (5 June) vote by the Norwegian parliament on whether the approximately US$900bn sovereign wealth fund should exclude companies with more than 30% of their revenue from coal mining, and electricity generators with more than 30% of their generation from coal. The media reports that parliament is expected to follow the recommendation of the parliamentary finance committee, and vote to implement the exclusion, effective January 2016.
In the past month we have had an acceleration of queries from fund managers and superfunds who are considering issues such as portfolio carbon intensity, and the valuation of fossil fuel reserves. Ahead of the UN climate change talks in Paris in late 2015, a number of large investors are keen to demonstrate that they stand ready to play a part in the solution. This includes initiatives such as “portfolio carbon footprinting”, signing up to the “portfolio decarbonisation coalition”, or considering whether to apply new fossil fuel “screens” within some of their funds. Interestingly, we feel that the fossil fuel industry was instrumental in discouraging stronger international action on climate change to date, and that frustration by major funds, NGOs and members of the public over lack of global action is now catalysing fossil fuel exclusions that may increasingly reduce demand for shares in “pure play” fossil fuel companies. Had governments implemented stronger actions earlier, the impact on investments would presumably have been broader-based, as carbon costs took effect across the economy, rather than being focused narrowly on purer play fossil fuel companies.
In short, keep carbon pricing, keep more coal.
