Indholdet på denne side er markedsføring

Published 26.10.2018 by Jan Erik Saugestad, Chief Executive Officer of Norway’s Storebrand Asset Management (US$85bn AuM)

I never thought we would see the day in Europe, a continent where the last coal plant may have already been built, where a community is fighting to protect ancient woodlands from the bulldozers of a corporation, not least in a country with abundant renewable power. 

But then I remembered, this is RWE, a power company which in January had bulldozers tear down a stunning 19th century cathedral to make way for its coal mine, again destroying villages.

Not surprisingly, RWE shares have plummeted as the expansion of the giant brown coal mine was halted in the courts. The ruling will stop RWE levelling ancient woodlands, for now, in a case which has become an iconic global fossil fuel fight not least as parts of the Hambach forest have been untouched for 12,000 years. This takes place at a time when German politicians are debating a transition away from old coal, which must happen by 2030 if the country is to uphold the Paris Agreement.

Even if the share price recovers, volatility and mismanagement are traits which investors want to avoid like the plague.
 

So who are we to criticise a German utility?

Storebrand is a US$85 billion Norwegian pension fund, the country’s largest private asset manager. We’re expanding our multi-billion dollar fossil free funds; we continue to exit companies where risks remain too high and we enter new progressive climate-friendly ones.
We dropped RWE AG shares in November 2017 ahead of the UN climate talks, along with nine other coal exposed companies like UNIPER and PGE, as part of self-imposed climate risk investment measures. This builds upon previous divestments on coal dating back to 2013.
We promote an investor to investor dialogue so that other like minded asset owners help us in moving the market away from coal and into clean alternatives. We want to work with companies on a green transition, investing in new solutions – however some companies and activities are just too incompatible with our ambitions.
 

Power companies have options

The French utilities Engie and EDF are also ploughing money into solar and wind power. Where European investors fail to go, others will fill the void. A remarkable case in point are Chinese investors who are now investing billions into European wind projects.
This year Germany produced enough renewable energy in the first half of the year to power every single household in the country, for an entire year. There are no excuses to remain in the coal business and every possible justification to expand coal mines should be seen in a long term context – and the IPCC is clear, the world needs to phase out coal now.
 

Dark clouds & death spirals

The award-winning think-tank, Carbon Tracker, which mainstreamed terms like stranded assets and the carbon bubble, has demonstrated that half of Europe’s coal plants are in fact losing money. Closing them would avoid €22 billion in losses by 2030. I’m excited by the prospect of their new global fossil fuel plant portal, which will be ready in ahead of the climate talks in Poland in December, and will show utilisation rates and profitability of coal plants in much greater detail. There really is nowhere to hide for coal plant operators and investors.

Air pollution is now the ‘biggest environmental risk’ in Europe, causing an estimated 400,000 premature deaths a year. The authors of Dark Cloud studies have shown how transmigratory impacts of coal plants in Germany are killing people across its borders. A silver lining is that cutting coal will save thousands of lives.
 

Inevitable Investor exodus

We ended our ownership in RWE on simple grounds: coal related shares are toxic and when a utility continues expanding their coal related activities, there is only one option, which is an exit.
 We became aware that several companies were hiding their coal related revenue through other segments. Most data providers deliver lower ranges of revenues from coal – something that does not match well with reality. We discovered this – and developed a method to make better estimates, and better calculate the risk. I would encourage other investors to look at how income is segmented for utility companies – and consider both production of electricity and its distribution.

The rising cost of CO2 will continue to push investors out of coal-exposed utilities – especially as there are better options out there. Effects of carbon taxes can already be seen, and several companies are being forced to reconsider plans.
Investors are paying attention, and a failure to transition towards a more sustainable energy system, will be met with further exodus.

Historisk avkastning er ingen garanti for fremtidig avkastning. Fremtidig avkastning vil blant annet avhenge av markedsutviklingen, forvalters dyktighet, investeringsrisiko og kostnader ved forvaltning. Avkastningen kan bli negativ som følge av kursfall.