- The asset manager is abstaining from investments in companies that operate in the fields of coal mining or the production of electricity or fuel
- Companies that "credibly commit" to exiting coal in accordance with the Paris Climate Accord, i.e. at the latest by 2030, will be exempt
- The policy will apply to all its mutual funds, so clients are sure that no coal mining or energy production from coal is involved regardless of the fund they choose
Austrian investment company Erste Asset Management has announced that it is "pulling the plug" on coal, abstaining from investments in companies that operate in the fields of coal mining or the production of electricity or fuel from coal as of 1 July 2021. The policy applies to all mutual funds that the it actively manages.
In a press release, Erste AM has reminded the words of Alok Sharma, President of the World Climate Conference COP, while he demanded emphatically the exit from coal: “This is the moment of truth… The world has to act now". The firm has also pointed out that the mining, burning, and use of coal contribute significantly to the increase in greenhouse gases and thus to global climate change. In its view, the coal sector bears a particular responsibility with regard to the conservation of the environment, the safeguarding of human rights, and health vis-à-vis society and future generations.
The asset manager will therefore exclude all companies from the investment universe of the affected funds from today, unless they "credibly commit" to exiting coal in accordance with the Paris Climate Accord, i.e. at the latest by 2030 on the basis of the IPPC report of 2014. In addition, Erste Group, the parent company of Erste AM, announced in March that it would gradually reduce its financing for the steam coal mining and coal-fired power generation sectors and end them entirely by 2030.
Based on the report of the Intergovernmental Panel on Climate Change (IPCC, 2014), the global warming limit of 1.5 degrees Celsius set at the world climate summit in Paris in 2015 can only be achieved by exiting the coal sector.
Maintenance of power and heat supply
“As early as in 2016 we were one of the first investment companies in the German-speaking region with a corporate coal policy. We now reach the next milestone by adhering to even more stringent criteria in our investments. We would explicitly want others to follow suit so we can solve the climate crisis together,” says Heinz Bednar, CEO of Erste AM.
Due to the current status of coal in the maintenance of the energy and heat supply in Central and Eastern Europe (CEE), the transition has to be socially agreeable and along the lines of supply security. “This is why we deliberately chose a mix of exclusion and engagement, in order to guide companies in a focused fashion through the transformation towards the use of renewable energies,” he explains.
In their opinion, this makes jobs in the affected sectors safe for the future and also ensures the maintenance of supply security amid the exit from climate-damaging energy generation.
How to exit from coal
The benchmarks of the new policy are based on the sales thresholds derived from the Austrian Ecolabel and on scientific findings on the time there is to exit coal in order to achieve the Paris climate goals.
“Sustainable investment affects our entire company and, ultimately, also our society. Therefore, it is insufficient to define more stringent benchmarks for a small line of products – these benchmarks have to apply to all mutual funds. The client has to be sure regardless of the fund he or she chooses that no coal mining or energy production from coal is involved,” says Bednar.
On the basis of this rationale and in collaboration with external research partners and data providers, Erste AM evaluates its operations with respect to the following areas: coal mining (thermic or metallurgic), power production from black coal or brown coal, fuel production (liquid or gaseous) from coal; a clear and published coal exit plan from the respective companies. The firm does not expect this measure to have any impact on the performance of the funds concerned, but rather to reduce long-term risks.
Bednar highlights that, by exiting coal investments, Erste AM "not only assumes responsibility as investor and minimises long-term environmental and financial risks", but the step also helps them comply with the Montréal Carbon Pledge, to which they are a signatory.