On 22 May, Reuters reported that French insurance company, AXA, had become the latest in a growing line of companies and not-for-profit organisations to announce divestment from the coal industry, saying it would pull out of investments worth €500 million (US$552.7 million). The AXA announcement followed similar news last month from the banks Credit Agricole, Bank of America and Societe Generale, all of which are either cutting back or stopping altogether their invesment in the coal industry.
The coal divestment campaign
Such news is music to the ears of the environmentalists behind the campaign to encourage institutions to divest from coal with the purpose of stopping the mining, processing and consumption of fuel. The environmentalists’ message is that if people stop investing in coal companies then the demand for coal will disappear.
However, the logic as a means to an end for coal by the environmental activists is fundamentally flawed in many ways:
- It is a purely emotive strategy that is trying to achieve their desired market and economic outcomes, without any market, economic or financial logic or basis.
- It fails to recognise an individual’s or organisation’s freedom to choose their investment portfolio.
- It has no concept of the investment market: shares sold at a market low, will be purchased by other investors for a longer-term gain, as is happening now.
- It has no concept of the free market and the supply and demand market of the global coal industry.
- It totally ignores predictions from recognised global energy institutions (both private and government) for an increase in coal demand for decades to come.
- It fails to recognise that developing nations are indeed utilising – or plan to utilise – coal as a major fuel in their industrialised development.
- It does not recognise that finance from multiple sources is continuing to flow into the global coal markets.
- It does not recognise that new coal companies are being formed across the world each and every year.
- It does not understand that coal is used for many other things, such as steel, alloys, cement, carbon fibre, activated carbon, silicon metal, plastics, nylon, soaps, aspirins, solvents, dyes – to name just a few.
No tangible impact
It is for the reasons above that the coal divestment campaign is having no tangible impact on the global coal business – and it won’t in the future. Environmental activists are claiming success, but the reality is that the coal market is typically cyclical. The coal market is currently in a downturn, which historically occurs every 7 – 10 yr. So any reduction in coal pricing or share value has nothing to do with the divestment campaign. Currently coal exports/demand are still breaking records, coal pricing is increasing and there are over 1000 coal-fired power plants being planned and constructed around the world. This defies the entire coal divestment campaign and any success claimed by the anti-coal activists.
If not, then why haven’t all of the world’s largest environmental organisations divested?
Coal divestment has been wholeheartedly acted on by some universities, churches and companies. One can only believe that the people voting to divest from coal now (at the very bottom of the market cycle) are smart enough to realise that they can gain some quick publicity: “free” publicity that they believe will help market their institutions. Coal divestment thus serves as merely a marketing tool for these institutions that need to sell their goods and services to the public.
But are they doing the right thing as custodians of finances that belong to their organisations and to other people? Are they taking a short-term gain for a longer-term loss just for a symbolic action? Are green activist companies profiteering from the coal divestment campaign at the expense of these divesting universities, churches and companies?
A most expensive marketing gimick
Institutions that have engaged in coal divestment have stated that they are incurring multi-million dollar financial losses by doing so. Investment experts are saying it could run into hundreds of millions of dollars in the long term. After their much publicised announcements of their symbolic coal divestment, what then? The publicity is short lived, perhaps 14 days on average, yet the financial loss will be felt for a much longer duration. Considering that the world’s demand and consumption of coal is still growing and the entire coal divestment campaign will not bring about the end of coal, it can only be viewed as a marketing tool: the world’s most expensive marketing tool.
Written by Russell Taylor. Edited by Jonathan Rowland.
About the author: Russell Taylor has over 20 yr of experience in the coal mining industry as a mining engineer, project director and mining executive. Most recently, he was Executive Vice President and Project Director at Reliance Coal Resources in India.
Read the article online at: https://www.worldcoal.com/special-reports/08062015/the-most-expensive-marketing-gimic-coal2385/