Investor-backed Transition Pathway Initiative says 20 largest coal companies must do more to disclose risk to their business from climate change
Many of the world’s leading coal mining companies are failing to properly manage the climate change threats faced by their business and are “poorly prepared for the inevitable regulatory risks” impacting their industry.
That is the stark conclusion of new research by the Transition Pathway Initiative (TPI), which is backed by asset owners and investors with more than £4tr of assets under management.
The TPI evaluated the management policies and processes of the world’s 20 largest coal mining companies as part of its latest industry risk assessment report.
Released yesterday, the report found small-to-medium sized pure coal companies are lagging behind the larger, more diversified mining firms in terms of the sophistication of their climate change management.
Meanwhile, companies such as DMCI Holdings, Inner Mongolia Yitai Coal and Shougang Fushan Resources Group “do not even appear to acknowledge climate change as a business issue at all”, the TPI said.
In contrast, larger firms such as Anglo American, BHP Billiton and Rio Tinto “perform well relative to other sectors”, it added.
However, the assessment – which was carried out by the London School of Economics’ Grantham Research Institute of Climate Change and the Environment with the support of data from FTSE Russell – only covers management quality, as many mining companies “do not yet publish adequate data on carbon emissions to evaluate performance”, the TPI said.
The report found few major coal companies measure their lifecycle carbon emissions, despite the huge impact of burning coal on the overall carbon footprint of the sector. Moreover, it said the coal sector as a whole lags behind the electricity utilities industry on managing climate change risk.
For example, energy utility companies from every EU nation except Poland and Greece made a historic pledge in April that no new coal-fired plants would be built in the EU after 2020.
First launched in January, the TPI encompasses a group of 13 international asset owners and five asset managers, including the Church of England’s National Investing Bodies and the Environment Agency Pension Fund. It carries out industry assessments in order to help investors gauge the carbon risk in their portfolios and consider whether companies’ policies are consistent with targets in the Paris Agreement.
Emma Howard Boyd, chair of the Environment Agency, said the report showed there was “demonstrable evidence” that despite the obvious challenge to the industry posed by climate change, some coal companies “are making progress in managing the risk of transition to a low carbon economy, even in our most challenging of sectors”.
Yet overall there is still plenty of room for improvement in the quality of carbon emissions management undertake by all of the 20 companies assessed in the report, according to Professor Simon Dietz, co-director of the Grantham Research Institute. “Many companies in this sector are poorly prepared for the inevitable regulatory risks that they face,” he said.
The latest findings follow separate news yesterday that 11 major banks representing more than $7tr in capital plan to become the first in the global financial sector to put into practice the climate risk disclosure guidelines set out recently by the Financial Stability Board’s Task Force on Climate-Related Financial Disclosure (TCFD).
Adam Matthews, co-chair of the TPI and head of engagement for the Church Commissioners and Church of England Pension Board, said he was pleased that some of the largest general mining companies were engaging at a strategic level with the low carbon transition. But he warned that there was still “insufficient data” for investors to properly assess the coal industry’s exposure to climate risk.
“It is also extremely concerning that a significant group of mining companies do not even seem to be acknowledging the fundamental risk to their businesses posed by climate change,” said Matthews.