Erste Asset Management (EAM) has excluded companies that derive more than 30% of sales from coal mining from its mutual funds. In doing so, EAM is one of the first asset managers to have taken this step. “This was the next logical step for us, having excluded coal mining from our sustainable funds at the beginning of the year,” as Heinz Bednar, CEO of Erste Asset Management, explains.
The entering-into-force of the Paris Agreement (NB. on climate change) has become more likely. In order for the agreement to come into force, it has to be signed by at least 55 countries, which account for a minimum of 55% of global CO2 emissions. With India on board, we are now looking at 62 countries and a total of 52% of global CO2 emissions. Within the framework of these developments, Erste Asset Management is also taking further steps to support the climate goals.
Companies that derive more than 30% of sales from coal mining have been excluded
This threshold excludes all companies, whose core business is coal mining, from the portfolios of EAM´s mutual funds. Whereas so far mainly institutional investors and insurance companies have taken this step, Erste Asset Management has now implemented this resolution for its entire range of mutual funds. Heinz Bednar, CEO of Erste Asset Management: “The almost full exclusion of investments in coal mines is an important step for us towards achieving global climate goals.”
Sustainable funds: energy utility companies are now subject to more stringent criteria
In the sustainable funds of Erste Asset Management, we are going one step further. Energy utilities that derive more than 20% of their energy production from coal will be excluded. We started selling the titles identified from our funds on 1 August.
If one were to take all the companies affected by exclusion in the areas of basic industries and energy utilities out of the MSCI World index, the weighting of these sectors would decline by about 2%. According to calculations by EAM, the CO2 intensity of the benchmark index MSCI World would decrease by about 32% in this case. This means that the remaining companies of the MSCI World index would be 32% less CO2-intense than before.
Coal mines excluded from sustainable funds already at the beginning of the year
EAM excluded all companies that derived at least 5% of their sales from coal mining from the investible, sustainable universe (equities and corporate bonds) in spring 2016. “In doing so, we distinguish between coal as raw material for steel production, which is still permitted and necessary, and coal as fuel, which is discretionary. Therefore, we have excluded the latter one,” as Dominik Benedikt, analyst of the sustainability team of EAM, explains.
1) The CO2 intensity as key ratio indicates the annual emission of CO2 in tons per USD 1mn in sales.
Coal-burning is responsible for a large part of the potential hothouse emissions
Current research results illustrate that a maximum of ten to 20 percent of global coal reserves can be burnt in order to cap global warming at the agreeable value of below two degrees Celsius. Although almost all industries are affected by these challenges, it is mainly the most CO2-intense sectors such as utilities, commodity producers, energy producers, and industrial companies that are faced with the challenge of using an increasing amount of renewable energy and using energy more efficiently.