The Coal Conundrum: Rethinking Divestment

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.