By Alistair MacDonald 

This article is being republished as part of our daily reproduction of articles that also appeared in the U.S. print edition of The Wall Street Journal (February 27, 2020).

Two of the world's largest investment funds have begun selling down stakes in coal miners citing environmental concerns, leaving shares of some of the companies concentrated in the hands of a few large U.S. investors.

As big fund managers amend what they call their ethical investment policies, analysts say more selling could follow.

In recent weeks, Norway's trillion-dollar sovereign-wealth fund, Norges Bank, and French giant BNP Paribas Asset Management have sold shares in companies that mine thermal coal, including Anglo American PLC. A few large funds, including Vanguard Group and Dimensional Fund Managers, now have outsize holdings in many smaller coal-mining companies.

Other large investors are assessing their own policies for thermal coal or extending current ones. Thermal coal is considered one of the biggest contributors to climate change by many scientists.

"Even if funds don't have these restrictions today, do they want to have these problems going forward?" said Ben Davis, a mining analyst at Liberum.

Norges Bank won't invest in companies that extract more than 20 million metric tons of thermal coal a year or maintain coal-power capacity of more than 10,000 megawatts. On Monday, it sold another large slice of Anglo's shares, reducing its stake to 1.38% from 2.42% at the end of last year, according to FactSet.

BNP Paribas Asset Management, which has more than $490 billion under management, recently began selling shares in companies that derive more than 10% of their revenue from mining thermal coal, a spokesman said.

BlackRock Inc., by virtue of being the world's largest money manager, is a major investor in thermal-coal miners and utility companies. Larry Fink, its chief executive, said the company's actively managed debt-and-equity portfolios will move away from thermal coal this year as the sector's exposure to increased regulation makes it less economically viable.

BlackRock also said it would closely scrutinize other businesses that are heavily reliant on thermal coal as an input.

Still, the impact will be muted. BlackRock's index-tracking funds can still hold such stocks, and its smaller active-management business will only exit companies that generate more than 25% of their revenue from thermal-coal production.

Diversified giants such as Anglo and Glencore PLC should be exempt from the firm's limitations. Coal miners such as Arch Coal Inc. and Whitehaven Coal Ltd. -- of which BlackRock owns 7.4% and 5%, respectively -- are less secure.

BlackRock also isn't divesting shares of coal-powered utilities. It owns stakes of more than 5% in American Electric Power Co., Duke Energy Corp. and Southern Co.

An ongoing danger for miners and utilities, analysts say, is that fund managers with no current restrictions on coal won't want to risk owning such companies in case their firm's environmental, social and governance policies change.

U.K.-based Aviva PLC has already sold its shares in 17 companies that drew more than 30% of their revenue from thermal-coal power generation or mining. But the fund is looking at going further by focusing on how much coal companies mine or use, rather than just portion of revenue, according to a spokesman.

A handful of funds hold outsize positions in certain coal miners and utilities. Vanguard, BlackRock and Dimensional together own almost 24% of the share capital of Arch Coal, for instance. A unit of Invesco, another fund that cites its environmental credentials, owns a further 21% of the St. Louis-based miner.

A spokeswoman for Invesco said the company supports the move away from carbon-based fuels to more sustainable forms of energy but declined to comment further.

"Vanguard is deeply concerned about the long-term impacts of sustainability risks, such as thermal coal producers," a spokeswoman for the fund said.

A spokesman for Dimensional said that some of its funds take into account environmental factors such as climate change.

For Vanguard and BlackRock, it isn't clear how much of their holdings in coal companies are in index trackers.

Coal miner Peabody Energy Corp. estimates that much of the nearly 12% stake these funds own in the company is in index trackers.

Dimensional owns a further 5.3% of Peabody, while activist investor Elliott Management Corp. owns 30%.

For every fund selling stock citing environmental reasons, there are many others willing to invest, said Vic Svec, a spokesman for Peabody. Because demand for coal remains, policy-driven divestment risks shifting its production and use from transparent public companies with so-called ESG standards to unlisted ones without such concerns, he said.

Some fund managers say they prefer engaging with the companies they own, rather than simply exiting them. Aberdeen Standard owns large stakes in miners Anglo, Glencore and BHP Group Ltd., as well as Enel SpA and RWE AG, two European utilities that generate some of their energy through coal.

"We were vocal in pushing both [utilities] to be as proactive as possible in phasing out their coal-powered generation," said a spokeswoman for Aberdeen Standard. RWE recently bought several large renewable-energy businesses.

Shares in coal miners and utilities have been under pressure for years. Peabody has fallen 85% since June 2018 and Arch Coal has dropped about 40% over a similar period -- and they took another hit Wednesday after U.S. regulators rejected their plan to combine some of their operations.

Shares in Anglo and Glencore have underperformed their peers, with analysts often citing thermal coal as one of several reasons.

Anglo and BHP have both said they would gradually dispose of their thermal-coal assets. But selling them isn't easy, given that few Western-based miners want to bulk up in coal. BHP hired banks to sell its thermal-coal assets last summer, and they remain unsold.

Glencore says it is keeping its coal. Coal still accounts for 27% of all energy used world-wide and 38% of electricity generation, according to the International Energy Agency. "The world still needs coal," CEO Ivan Glasenberg said on a recent conference call.

Write to Alistair MacDonald at


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February 27, 2020 02:47 ET (07:47 GMT)

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