BNP Paribas fund arm to exclude some coal and mining companies

(Reuters) - BNP Paribas Asset Management, the investment management arm of the French bank, is to stop investing in companies that obtain more than 10 percent of their revenue from thermal coal.

The exclusion of such companies producing thermal coal and generating electricity from coal was announced on Thursday and will come into effect at the start of next year as part of the fund’s strategy to reduce economic risk within its portfolios as coal becomes uncompetitive as a fuel for power generation.

Fossil fuel divestment has gathered pace over the past few years as pension funds, sovereign wealth funds and universities have sold oil, gas and coal stocks, especially after the 195-nation global climate agreement signed in Paris set a goal in 2015 of phasing out the use of fossil fuels this century.

Norway’s $1 trillion sovereign wealth fund, the world’s largest, is barred from investing in companies that gain more than 30 percent of their business from coal and last week said it would sell its stakes in oil and gas explorers and producers.

BNP Paribas Asset Management, which had nearly 400 billion euros ($452.6 billion) of assets under management at the end of last year, said it will exclude companies that derive more than 10 percent of their revenue from mining thermal coal and/or account for 1 percent or more of total global production.

Power generators with carbon intensity - the level of carbon emissions per unit of economic growth - above the 2017 global average of 491g of carbon dioxide per kilowatt hour (CO2/kWh) will also be excluded, it said.

To keep global warming within safe limits, the International Energy Agency has said that power generators’ carbon intensity needs to fall to 327g of CO2/kWh by 2025.

“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,” said Mark Lewis, global head of sustainability research at BNP Paribas Asset Management.

The company said it would consider exceptions for miners and power generators that make “credible commitments” to reducing their coal-based activities to levels consistent with the 2015 global climate pact.

However, such exceptions will depend on company strategies for the disposal of coal assets or for acquiring lower-carbon generation capacity and would be granted on a half-yearly basis and on expectations companies would comply within two years.

Reporting by Nina Chestney; Editing by David Goodman