The Coal Conundrum: Divest AND Engage Intro
If the goal is a net-zero portfolio, divesting might seem the path of least resistance, especially when it comes to coal. But it may hardly move the needle on achieving a net-zero economy. To do that, investors will likely look to expand their toolbox: engage where they can exert leverage, divest where they can’t, plus insert themselves collectively into policy discussions to change the context.
Irrespective of the choice, all roads go through the five key markets that are dependent on coal — the U.S., Australia, China, Russia and India,1 which together accounted for 75% of global coal consumption. The chart below shows how their dependence on the dirty fuel translates into power generation: 47% coal-based for the MSCI ACWI Index utilities constituents in these countries versus 14% for constituents located elsewhere.
The five coal-dependent countries: Australia, China, India, Russia and the U.S. Source: MSCI ESG Research. MSCI ACWI Index constituents and data selected on an annual basis. Figures represent a simple average of values for the companies included.
The Coal Conundrum: Divest and Engage footnotes
1“Global Coal to Clean Power Transition Statement.” UN Climate Change Conference UK 2021 website, Nov. 4, 2011.