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‘Death Spiral’ for Coal Seen in Wealth Fund’s Divestment Decision

The decision by Norway’s US$850 billion sovereign wealth fund to drop 32 coal mining companies from its portfolio in 2014 points to the “death spiral” facing the coal industry, a UK analyst says.

“One of the largest global investment institutions is winding down its coal interests, as it is clear the business model for coal no longer works with western markets already in a death spiral, and signs of Chinese demand peaking [1],” said Carbon Tracker Initiative Research Director James Leaton.

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“Our risk-based approach means that we exit sectors and areas where we see elevated levels of risk to our investments in the long term,” said Marthe Skaar, spokeswoman for Norway’s Government Pension Fund Global. “Companies with particularly high greenhouse gas emissions may be exposed to risk from regulatory or other changes leading to a fall in demand.”

In its responsible investing report released last week, GPFG said it had withdrawn its funds from a total of 114 companies on environmental and climate grounds, including tar sands/oil sands, cement, and gold mining interests.

The 22 firms that lost GPFG’s confidence due to high greenhouse gas emissions included 14 coal mining companies, one utility that generates electricity from coal, five tar sands/oil sands producers, and two cement companies. The fund also dropped 16 coal producers linked to deforestation in India and Indonesia, and two engaged in mountaintop removal in the United States.

Carbon Tracker estimates that “$112 billion of future capital expenditure in potential thermal coal production, excluding China, is at risk of becoming stranded,” David Thorpe reports [3] in a post on Sustainable Cities Collective.

(h/t to the Ottawa Renewable Energy Co-op [4]and Clean Energy Review [5] for pointing us to this story)