BNP Paribas Asset Management (BNPP AM) is ramping up its efforts to tackle climate change by excluding coal across all its actively managed open-ended funds.
The coal-exclusion policy implies the French manager will divest from the single largest source of carbon emissions, excluding companies that derive more than 10% of their revenue from mining thermal coal and/or account for 1% or more of total global production.
The tighter exclusion policy, coming into effect at the start of 2020, will not apply just to all BNPP AM's actively managed open-ended funds but also will become the default policy for segregated mandates.
According to the firm, the policy will reduce the economic risk in portfolios since coal becomes increasingly uncompetitive as a fuel for power generation.
"Power generators whose carbon intensity is above the 2017 global average of 491 gCO2/kWh will also be excluded, with BNPP AM subsequently following the Paris-compliant trajectory for the sector as determined by the International Energy Agency in its Sustainable Development Scenario," the company explained in a statement.
Mark Lewis, global head of Sustainability Research at BNP Paribas Asset Management, said: "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.
"The main renewable technologies already compete favourably 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."
BNPP AM also highlighted the importance of encouraging companies to reduce their dependence on coal mining and coal-fired power generation in order to align their activities with the Paris Agreement. The firm will therefore consider exceptions for those miners and power generators that make credible commitments to reducing their coal-based activities to levels consistent with the Paris Agreement within the required time frame.
Exemptions will be granted on a half-yearly basis, with those companies demonstrating their commitment to the policy expected to comply within two years.