The pension funds of millions of people across the world, including teachers, public sector workers, health staff and academics in the UK and US, are heavily exposed to the plummeting coal sector, a Guardian analysis has revealed.
It has also found that just a dozen people, including the owner of Chelsea FC, Roman Abramovich, own coal reserves equivalent to the annual carbon emissions of China, the world’s biggest polluter. The UN, which advocates a shift to clean energy, has more than $100m (£65m) invested in coal through its own pension fund.
The Guardian examined the ownership of the biggest 50 publicly traded coal companies, ranked by the reserves of the fossil fuel they hold. If burned, these reserves would produce the equivalent of more than 10 years of global emissions. This alone could push the planet past beyond the 2C of climate change deemed dangerous by the world’s governments.
A fast-growing, global fossil fuel divestment movement, backed by the Guardian’s Keep it in the Ground campaign, is having particular success in persuading investors to dump coal stocks. The world’s largest sovereign wealth fund, held by Norway, decided earlier this month to sell off more than $8bn of coal assets.
The World Bank and the Bank of England have both warned that global action to cut carbon emissions could render fossil fuel reserves worthless, as analyses show most must remain in the ground. Coal, the most polluting fuel, is particularly at risk and investment bank Goldman Sachs declared in January the fuel had reached “retirement age”. A crunch UN summit in December is tasked with agreeing an international climate change deal.
The coal price has crashed by 60% since 2011, as gas, renewable energy and climate policies have damaged demand. Tom Sanzillo, a former New York State comptroller who oversaw a $156bn pension fund, said: “Coal is arguably the worst performing sector in the whole world. Pension funds, which have a fiduciary duty to make money, have no business owning any of these companies. It is not a prospective risk, it is a now risk.”
“The coal sector is falling into a financial death spiral,” said Mark Campanale, founder of the Carbon Tracker Initiative, which has pioneered analysis of the financial risks of fossil fuels. “The members of university, healthcare and UN pension funds are smart and informed people; they will be shocked to discover just how far exposed their funds are to coal investment risk.”
The Guardian analysis has uncovered large coal holdings by some of the world’s largest pension funds, with the largest held by South Africa’s Public Investment Corporation (PIC), which provides government pensions for millions. It has an $8bn stake which represents a huge 6.1% of all its funds: most large funds have significantly less than 1%.
Other pension funds with significant coal stakes include: APG ($1.7bn), which provides pensions for one in five families in the Netherlands; TIAA-CREF ($838), the US pensions giant which serves 5 million teachers and the Canadian Pension Plan Investment Board (CPPIB - $590m), which provide the country’s state pension for 18 million people.
In the UK, the £48bn Universities Superannuation Scheme (USS), which provides pensions for 330,000 university and college staff, has a substantial stake in the top 50 coal companies, as do six local authority pensions funds including West Yorkshire. In the US, 25 public sector pension funds have investments in the the top 50 coal companies, spread from California to Alabama, Ohio and New York.
The analysis used data from Reuters retrieved on 25 April 2015 to determine the ownership of the top 50 publicly traded coal companies, as ranked by Fossil Free Indexes on the basis of the coal reserves held by each company.
A spokesman for APG, one of the largest pension funds in the world, said: “We have declined several new coal investments in the past year and reduced our exposure in a number of coal companies. We expect that our exposure to coal will decline over time.” PIC, TIAA-CREF, CPPIB and the UN pension fund did not respond to requests for comment.
A spokeswoman for USS, one of the UK’s biggest pension funds, said it been working for more than a decade to have climate change recognised as a risk factor by institutional investors. It has $322m invested in mining companies Anglo American, Glencore and Rio Tinto, but argues coal is a minor part of their business. However, the three companies have combined coal reserves are almost equivalent to the entire world’s annual carbon emissions.
The Guardian’s analysis of individuals with large stakes in top 50 coal companies was led by Vinod Shantilal Adani, whose $900m stake in Indian coal giant Adani Enterprises, means he owns coal reserves that will produce 2GT of carbon dioxide when burned, the same as all of India’s 1.2 billion people produce in a year.
Second is Abramovich, whose $766m stake in steel and mining company Evraz gives him a large share in Russia’s largest coal mine and the equivalent of 1.5GT of carbon emissions, not far short of the annual output of Russia itself. Another of the seven Russian oligarchs in the “dirty dozen” list is Suleiman Kerimov, with investments equivalent to 0.922GT of CO2. Kerimov is known for hiring stars including Beyonce and Shakira to sing at his parties and for owning one of the world’s largest private yachts.
Many of the largest stakes in the top 50 coal companies are held by asset management companies and BlackRock, the world’s biggest asset manager, leads this list with $24.6bn. But the Guardian analysis shows that BlackRock’s holding represents 0.65% of its total assets, a proportion that is over 50 times greater than the world’s second biggest asset manager, Allianz.
Also heavily invested in coal is the largest manager of UK pension assets, Legal & General. Whilst L&G are the 24th biggest asset manager in the world, they have the fourth largest coal stake, with $3.3bn in the top 50 companies, representing 0.51% of its total assets. Coal is similarly high in the funds held by Aberdeen Asset Management.
South Africa’s private investment companies, like the government pension fund, are very heavily invested in coal. Allan Gray, the nation’s largest privately owned asset manager has $3.2bn in the top 50 coal companies, representing a 8.0% of all the assets it manages. It has a large stake in Sasol, which owns six coal mines in South Africa.
Among these asset managers, only Allianz responded to requests for comment. Managing director Karsten Löffler said: “We take the move to alternative energy sources and climate protection very seriously. It is in our interest to assist the energy sector, which drives forward the global economy, with an orderly transition to an environmentally-friendly economy.”
Some large insurance companies also have substantial stakes in the top 50 coal companies, including the state-owned giant Life Insurance Corporation of India which has $5.6bn invested. French company Axa has a big insurance business and the group has $2.6bn invested in the top 50 coal companies, but recently committed to sell a fifth of those coal assets. In March, the Bank of England warned that insurance companies could suffer a “huge hit” if their investments in fossil fuel companies are rendered worthless by action to tackle climate change.
Joining BlackRock and South Africa’s PIC in the top five coal investors overall are the government of India ($46.5bn), via its interest in its state-owned coal and power station companies, Valepar, the majority owner of Brazilian mining giant Vale, and the Aluminium Corporation of China, which owns $9bn of Rio Tinto shares.
Campanale said coal companies faced serious challenges: “Sometime soon, the coal chairmen will be facing their own ‘Sepp Blatter moment’. They may be in power, but institutional support is withering away. Investors are realising the business models and future assumptions of big coal are fundamentally flawed.”
Sanzillo, now at the US-based Institute for Energy Economics and Financial Analysis, said there was no real prospect of recovery for an industry whose the main market measure, the Stowe index, had fallen by 75% since 2012. “Coal is not making money, not talking to you, there’s no turn around strategy and there’s an international climate conversation of which they want no part – so you divest.”
Pension funds
Dozens of pension funds around the world are invested in the top 50 publicly traded coal companies, according to a Guardian analysis. South Africa’s Public Investment Corporation Limited (PIC), which provides pensions for many of the nation’s public sector workers, has the largest stake with $8bn invested.
This is largely due to a $5.6bn stake in Sasol, which owns six coal mines in South Africa, but whose share price has fallen 40% in a year. Overall PIC’s coal investments represent a 7.5% of all its assets.
“They have put a political constraint on their investment which should not be there – it is definitely an overexposure,” said Tom Sanzillo, a former New York State comptroller who oversaw a $156bn pension fund. He said those responsible for the fund needed to act: “The fiduciaries need to say: ‘We are losing money and we want out’.”
The second highest stake among pension funds in the top 50 coal companies is owned by Dutch pensions giant APG, which provides pension for one in five families in the Netherlands, including teachers, public sector workers and medical staff. It has $1.7bn invested in 26 of the coal companies but is reducing its coal exposure.
TIAA-CREF, the US pensions firm which serves 5 million teachers, doctors and academics, has $838m in 30 of the top 50 coal companies, while the Canadian Pension Plan Investment Board, which provide the country’s state pension for 18 million people, has $590m invested the companies. The pension fund with the fifth biggest stake in the top 50 coal companies is another Dutch provider, PGGM, which serves 1.5m people and has $399m in the coal firms.
The United Nations Joint Staff Pension Fund also invests in the top 50 coal companies – $106m – despite the clear message sent to investors made by secretary general Ban Ki-Moon in November 2014: “Please reduce your investments in the coal- and fossil fuel-based economy and [move] to renewable energy.”
Seven UK public sector pension funds have investments in the top 50 coal companies, led by the Universities Superannuation Scheme (USS) with $322m. The USS provides pensions for 330,000 university and college staff.
The West Yorkshire Pension Fund has a particularly high proportion of assets in the top 50 coal companies, with its $215m stake comprising 1.3% of all its assets. Other UK public sector pension funds with stakes in the top 50 coal companies are West Midlands, South Yorkshire, East Riding, Nottinghamshire and Lincolnshire pension funds.
In the US, 25 public sector pension funds have investments in the the top 50 coal companies, spread from California to Alabama, Ohio and New York. The giant California Public Employees’ Retirement System (Calpers) is the largest, with $298m invested, including stakes in companies that have used the controversial mountain-top removal method to mine coal, including Arch Coal, Alpha Natural Resources and Consol Energy.
The Teacher Retirement System of Texas is the next largest US public sector pension fund investing in the top 50 coal companies, with $105m.
Asset managers
The world’s 10 biggest asset management companies have widely varying stakes in the top 50 coal companies, according to a Guardian analysis.
BlackRock, the world’s largest asset management firm has $24.5bn, representing about 0.65% of all its assets. But the company with the second largest assets under management, Allianz, has just 0.012% of its funds invested in the 50 biggest coal companies, more than 50 times less than BlackRock.
Vanguard, the third largest asset management company, is like BlackRock relatively heavily invested in the top 50 coal companies, with 0.277%. Among the rest of the 10 biggest asset-holding companies, State Street Global, Axa and JP Morgan have about twice the exposure to the top 50 coal companies of Fidelity, Bank of New York Mellon, BNP Paribas and Deutsche Bank.
A spokesman for US-based Vanguard said 70% of its funds simply tracked indices. He said the Vanguard staff actively managing the other 30% “are charged with producing the highest investment returns possible. We do not require, or even expect, our advisers to make investment decisions based on social or political issues.”
Axa recently announced it will sell off €500m ($550m) of stocks from the €500bn fund it directly controls, targeting the companies whose business is more than 50% coal. But a spokesman said: “Given the dependency of many people and sectors of the world’s economy on coal, Axa is not a proponent of what is being called a “disorderly withdrawal from coal”. He said Axa would also increase its green investments to €3bn by 2020.
A spokesman for BNP Paribas said: “We are not a major investor in coal companies worldwide. We are fully aware that our financing and investment activities can have significant social and environmental consequences.” BlackRock, State Street Global and JP Morgan did not respond to requests for comment.
The Guardian’s analysis used data from Reuters retrieved on 25 April 2015 to determine the ownership of the top 50 publicly traded coal companies, as ranked by Fossil Free Indexes on the basis of the coal reserves held by each company.
