Capital flight from coal accelerating

From IEEFA:

Global capital flight from thermal coal and the coal-fired power sector is already at a canter in 2020.

BlackRock’s January announcement of its divestment from thermal coal is huge, and an unexpected move by this global giant (US$7 trillion assets under management (AuM), given the asset manager’s entrenchment as a climate action laggard.

At the same time, asset manager Aegon has announced a new, enhanced, coal divestment program. In total, 116 globally significant banks and insurers have now put in place increasingly stringent coal policies to move towards alignment with the Paris Agreement.

Corporate greenwash is moving to polices of substance.

Already in 2020, the economic cost of inaction on climate change (as demonstrated by the catastrophic bushfires in Australia) has been made starkly obvious to even the dullest of climate science deniers (a grouping to which the country’s political ‘leaders’ seem to be excessively well represented).

Regardless of whether countries prepare for the climate science and technology-driven transformation of energy markets, the global energy transition is happening. Australia and others can start preparing for it or remain on a deeply rutted path of continued energy policy chaos.

Renewable energy deflation is accelerating below the cost of new coal-fired power plants in an increasing number of countries. This makes transition planning for the eventual terminal decline of thermal coal long overdue.

As one of the three largest fossil fuel-export nations globally, Australia’s economy is exceptionally exposed. Australia can continue ‘investing’ in yet more coal and liquefied natural gas (LNG) capacity and can build more and more stranded assets (along with the harm to regional communities involved). Alternatively, Australia could pivot towards the low-emission industries of the future. Australia’s Chief Scientist Dr Alan Finkel has been talking about this for a number of years, along with Atlassian co-founder Mike Cannon-Brookes, and Professor Amanda Cahill.

Australia should embrace the opportunities the energy disruption is unleashing.

Financial markets are already making the pivot. While Tesla shares have doubled in recent months, the world’s largest gas fracker, Chesapeake Energy’s (U.S.) shares have halved. Meanwhile, Peabody Energy has destroyed half of its shareholder wealth in just six months, 80% in just this past year.

As for renewables, the world’s largest investor in renewable energy and battery storage, NextEra Energy, just keeps skyrocketing.

BlackRock founder Larry Fink said last week he expects “a fundamental reshaping of finance.” IEEFA agrees with him on this.

Having worn investor losses of increasing stranded asset risks for a long time now (Peabody and GE, for example), Fink has belatedly announced the immediate divestment of their debt and equity stakes in mining firms materially exposed to thermal coal (>25% of revenues). In Australia, this catches Whitehaven Coal, Yancoal Australia, New Hope Corporation, Australian Pacific Coal, TerraCom, (and Wollongong Coal, although they do not have any revenue), plus a review of all coal-dependent utilities.