Carmignac, a company with 34 billion euros in assets under management, recently adopted a new version of its coal policy. The new policy makes some important progress but several flaws remain and the investor misses the opportunity to directly adopt a robust coal exit policy.
1. What’s new?
Carmignac was already excluding mining companies deriving more than 10% of their revenues from thermal coal. The asset manager is adopting additional criteria:
- Companies producing more than 20 Mt of thermal coal per year are also excluded;
- However, exceptions are possible for companies that have made commitments to reduce the share of their thermal coal activities to less than 10% of their revenues within 2 years.
Carmignac is also adding criteria for the exclusion of power companies:
- Planning new coal plants;
- Not respecting a trajectory of carbon intensity emission reduction according to a timebound plan, with however potential exceptions for companies also taking reduction commitments and committing to exit from the sector.
2. Our analysis: a missed opportunity
Carmignac was one of the most backward players on the Paris financial place before this update.
Regarding the mining sector, the adoption of an exclusion criteria based on a company’s absolute coal production is welcome. Unfortunately, Carmignac is missing the opportunity to immediately align itself with the 10 MT threshold retained by the Global Coal Exit List and already adopted by financial players such as Crédit Mutuel AM. Moreover, exceptions are still possible for companies committing to fall below the 10% threshold within 2 years, even though Carmignac has communicated to Reclaim Finance that it does not currently make any. The policy does not indicate whether these exceptions could apply only to companies above the 10% threshold or also to those above 20 Mt.
It is especially on the power generation side that the biggest hurdle lies. Carmignac plans to exclude companies deriving more than 10% of their revenues or electricity production from coal only when they do not indicate the carbon intensity of their energy mix and therefore cannot be analyzed according to the trajectory required by Carmignac, which is rare. While the approach of reducing this intensity over time is interesting, it must absolutely be coupled with an approach of immediate exclusion of the most important players in the sector (above 20% of production and above 5 GW of capacity), as Crédit Mutuel AM already does. Some exceptions remain possible even with this approach, but they only concern one company in 2 funds to date according to Carmignac.
An important addition of this new version of the policy is the exclusion of coal mine and coal plant developers, companies that still plan to expand this sector at a time when its rapid decline should begin.
But unlike Amundi, for example, Carmignac’s new policy still does not exclude developers of coal infrastructure, a limited number of companies that are nevertheless decisive in opening up some mining basins, as in Australia, or that risk locking countries into coal dependency, such as Kenya or Bangladesh.
Another positive point and policy improvement lies in the adoption of a clear commitment to exit from the coal sector, both mining and power plants, by 2030. A new document published on the Carmignac site on November 17 makes it clear that this commitment concerns any company with more than 0% of its activities related to coal. On the other hand, contrary to what Amundi, OFI AM and others are doing, this commitment does not include the explicit request for the remaining companies in the portfolio to adopt such exit plan by the same deadline.
Carmignac’s scores in the Coal Policy Tool
This table presents the scores of Carmignac’s coal policy on the 5 criteria of the Coal Policy Tool
3. Our conclusion
Carmignac’s new coal policy now includes some important elements such as the exclusion of coal mine/plant developers, and the 2030 deadline. But by adopting different strategies for the coal mining and power generation sectors, Carmignac is missing the boat and adopting a sectoral policy that is still insufficient. This is a missed opportunity to align itself with the best practices of Amundi, or OFI AM, as requested by Bruno Le Maire during the last Climate Finance Day. It will be necessary to make up for this mistake and correct the situation as quickly as possible so as not to be quickly overtaken by the leading players of the Paris financial center. And take action on oil and gas.