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BNP Paribas' fund unit to reduce investments in coal mining companies

BNP Paribas Asset Management, the fund management arm of French banking giant BNP Paribas SA, will stop investing in companies that make more than 10% of their revenues from coal mining.

The new policy will take effect at the beginning of 2020 and will apply to all of BNP Paribas Asset Management's actively managed open-ended fund, it said March 14

A BNP Paribas Asset Management spokesperson said in an interview that the policy would impact less than 0.25% of the fund manager's assets under management of €399 billion, dependent on market movements and changes to portfolio holdings.

The move is part of the fund's strategy to bring its portfolio in line by 2025 with the 2015 Paris Agreement on climate change, which aims to limit the global temperature rise to below 2 degrees C above pre-industrial levels. It follows moves by parent BNP Paribas, which in 2015 committed to ending the financing of coal-mining activities. In 2017, it said it would no longer do business with firms whose primary activity involves oil and gas from shale and/or oil from tar sands.

The spokesperson declined to say which companies BNP Paribas Asset Management would exclude from its portfolio.

"The policy is not designed to publicly identify those companies that do not comply, but to help us to use our influence as a major global investor to help those companies in the coal mining and power generation sector to work towards alignment of their business models with the goals of the Paris Agreement," he said.

Proceeds from the divestments will be reinvested according to mandate requirements and market conditions, the spokesperson said.

Power generation exclusion

BNP Paribas Asset Management also said it would exclude power generators from its investments if their carbon intensity is above the 2017 global average of 491 grams of carbon dioxide per kilowatt-hour. Carbon intensity is measured by the amount of carbon dioxide emitted per kilowatt-hour of electricity produced.

Under the International Energy Agency's Sustainable Development Scenario introduced in 2017 to bring the energy sector in line with the Paris Agreement, power generators' carbon intensity must fall to 327 grams of carbon dioxide per kilowatt-hour by 2025. BNP Paribas Asset Management said companies must achieve this goal between 2020 and 2025 or they will be excluded from the fund manager's asset portfolio.

Investment managers across the board are rethinking their strategies toward coal and fossil fuels in general. Man Group PLC announced in December 2018 that it would exclude some coal-related companies from its portfolio. Norway's $1 trillion Government Pension Fund Global said March 8 that it would phase out oil and gas investments after previously excluding coal.

"From an investment perspective the outlook for the coal industry looks increasingly uncertain as less carbon-intensive fuel sources, in particular renewables, become ever more competitive," Mark Lewis, global head of sustainability research at BNP Paribas Asset Management, said in a statement.

"The main renewable technologies already compete favorably with fossil fuel power generation, and in the best locations for wind and solar globally, new build costs are actually below those of existing fossil-fuel plants. The trend will continue as costs for all renewable technologies continue to fall," Lewis said.