The Asia Miner

APR-JUN 2019

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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the asia miner • volume 16 • issue 2 23 FEATURE: Coal announcing it would no longer insure coal. Sumitomo Mitsui Trust Bank ruled out coal-fired power plant lending soon a[er. In September 2018, Standard Chartered announced the end of lending for new coal plants, anywhere in the world. To close the year, some 415 global investors managing a collecঞve US$32 trillion called for a complete thermal coal phase out by 2030 across the OECD. By the start of 2019, over 30 global banks had ceased project financing for thermal coal mines and/or coal-fired power plants worldwide, without geographic loopholes. In January 2019, GMO founder Jeremy Grantham stated thermal coal is "dead meat". During the month, Export Development Canada (EDC) and Barclays both announced their exit from coal project finance, with EDC's commitment comprising all thermal coal infrastructure including ports and rail links. In late January 2019, Varma of Finland announced its cessaঞon from invesঞng in coal while Nedbank of South Africa withdrew financing for two major coal-fired power plant projects in South Africa, then February 2019 saw VIG of Austria cease coal insurance. The financial insঞtuঞons leaving coal behind are no ethically minded minnows – they are some of the largest across the globe. As extreme weather increases in frequency and extremity the list will conঞnue to grow, while the lending exclusions and divestments will increasingly be delivered upon. CLIMATE CHANGE AND COAL Since 2013, there has been a rapidly increasing number of global financial insঞtuঞons announcing lending policies addressing the financial risks of climate change. The 100 and counঞng global financial insঞtuঞons already restricঞng and/or divesঞng from coal is a clear response to the growing discrepancy between the world's current carbon emissions trajectory and the technological investment and commitment required for the world to deliver on the Paris Agreement, a global treaty commiমng naঞons of the world to limit global temperature rises to 1.5 to 2.0 o above pre- industrial levels. The Internaঞonal Energy Agency (IEA) models the current trajectory of countries acঞng to reduce emissions under its New Policy Scenario (NPS), puমng the world on track for an unacceptable 2.7 o , or more if feedback loops create more non-linear change. In contrast, the IEA's Sustainable Development Scenario (SDS) forecasts a 50 per cent chance of holding global temperature rises to 2.0 o . The SDS models a 61 per cent decline in global thermal coal demand by 2040. Realisঞcally the SDS is far from sufficient to deliver on the Paris Agreement. The decline trajectory for thermal coal globally needs to be terminal by 2050, absent carbon capture and storage (CCS). This is clearly modelled in the IEA's Beyond 2 o Scenario (B2DS) and Bloomberg's New Energy Finance (BNEF) New Energy Outlook 2018 scenario which models a 50 per cent chance of limiঞng average future temperature increases to 1.75°C uঞlising a rapid decarbonisaঞon pathway. Another factor driving the global acceleraঞon of coal divestment coupled with insঞtuঞonalisaঞon of rigorous climate policy statements stems from the Task Force on Climate-related Financial Disclosures (TCFD). Under the visionary guidance of Bank of England's Governor Mark Carney, the Financial Stability Board (FSB) – an internaঞonal body monitoring and making recommendaঞons about the global financial system – has strongly endorsed the industry-led TCFD and its (for now) voluntary agreement to develop aligned and uniform disclosures acknowledging and assessing climate risks as they relate to financial insঞtuঞons. The TCFD covers all companies. This is important given financial insঞtuঞons both own, insure and lend to virtually every company in the world, and any evaluaঞon of climate risk requires clarity, transparency and reporঞng on systemic risks in their underlying asset and liability exposures. While companies are currently not required to comply with the TCFD, financial regulators and courts are increasingly recognising that directors have a fiduciary duty to assess, manage and report to shareholders on all key risks. For example, although a company's Board might deem the IEA's SDS path unlikely, their Fiduciary Duty will be to show they have clearly evaluated the financial risks in the event they are wrong. A third factor driving global divestment away from coal is capacity versus uঞlisaঞon. While global coal-fired power plant capacity has conঞnued to grow over the last decade, the concurrent collapse in average global coal-fired power plant uঞlisaঞon rates has seen record lows reached each year. Renewables and energy efficiency have massively undermined coal power's viability. The ongoing deflaঞon in renewable energy contrasts with the long-term inflaঞonary nature of coal-fired power plants. GLOBAL ASSET MANAGERS AND COAL Released at the United Naঞons Climate Change Conference 2018 (COP24), the 2018 Global Investor Statement to Governments on Climate Change included within its 415 signatories some of the world's largest pension funds, asset managers and insurance companies represenঞng over US$32 trillion in assets. The Global Investor Statement detailed three overarching prioriঞes: • achieve the Paris Agreement's goals; • accelerate private sector investment into low carbon transiঞon plans, and • commit to improve climate-related financial reporঞng. Specifically, investors called for a global price on carbon emissions and a thermal coal-plant phase out across the enঞre OECD by 2030, throughout China by 2040, and across the rest of the world by 2050. [It appears that] Mulঞlateral Development Banks are on the same path. In June 2013, then US President Barack Obama released 'The President's Climate Acঞon Plan' direcঞng agencies to support climate-resilient investment. The Plan also called for an end to US government support for public financing

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