Blackrock dumps thermal coal miners, Whitehaven share price drops

The share prices of coal miners like Whitehaven Coal Ltd (ASX:WHC) dropped after investment giant Blackrock dumped coal miners.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The share prices of ASX coal miners dropped today after Blackrock said it was going to exit thermal coal miners.

The Whitehaven Coal Ltd (ASX: WHC) share price fell almost 2% and the New Hope Corporation Limited (ASX: NHC) share price declined by 0.5%.

Blackrock is the world's largest investment manager with almost US$7 trillion of assets under management (AUM) at September 2019.

The asset manager said that it would exit thermal coal producers within its US$1.8 trillion active AUM. Indeed, Blackrock said:

"Thermal coal is significantly carbon intensive, becoming less and less economically viable, and highly exposed to regulation because of its environmental impacts. With the acceleration of the global energy transition, we do not believe that the long-term economic or investment rationale justifies continued investment in this sector. As a result, we are in the process of removing from our discretionary active investment portfolios the public securities (both debt and equity) of companies that generate more than 25% of their revenues from thermal coal production, which we aim to accomplish by the middle of 2020. As part of our process of evaluating sectors with high ESG risk, we will also closely scrutinize other businesses that are heavily reliant on thermal coal as an input, in order to understand whether they are effectively transitioning away from this reliance. In addition, BlackRock's alternatives business will make no future direct investments in companies that generate more than 25% of their revenues from thermal coal production."

It has been pointed out many times that one shareholder selling shares to another investor doesn't change or hurt the operations of the coal miner (or any other business). However, increasing the number of sellers and removing buyers from the market for coal miners does hurt the share price, and therefore hurts the remaining shareholders. More active action on climate policy is being taken by miners like BHP Group Ltd (ASX: BHP).

In a letter to investors, Blackrock CEO Larry Fink said that climate risk is investment risk, calling on every government, company and shareholder to confront climate change. He also said that "We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them."

Mr Fink thinks that the global economy is on the edge of a fundamental reshaping of finance. He raised a number of questions about the future, writing:

"Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? What will happen to the 30-year mortgage – a key building block of finance – if lenders can't estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas? What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts?"

As you might expect, Australia's Prime Minister Scott Morrison leapt to the defence of coal miners again. He said that coal is worth $70 billion a year to the Australian economy. His government still plans to "meet and beat" the emissions reductions targets without "putting taxes on people, putting up electricity prices and pulling out the rug from regional communities who depend on the sector for their livelihoods."

Foolish takeaway

Coal mining is unlikely to exist in its current form in 50 years from now, but as long as there are countries and businesses wishing to buy coal (and no export bans) there will continue to be coal sent from Australia's shores in the foreseeable future. But, I wouldn't want to buy into a coal miner today because of the poor growth prospects.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »