Burning coal has significant implications for air and water pollution, but its most serious long-term impact is on global warming. The story has become all too familiar: when coal is burned, it emits vast amounts of carbon dioxide, the most common anthropogenic greenhouse gas. Coal is responsible for around 45% of anthropogenic emissions, the largest single source of the global temperature increase.
Even if the international awareness of the climate emergency is increasing, the reality remains alarming. In November 2019, reports have shown that in China alone, 43GW of new coal power has been built in just over a year, and an extra 148GW is planned – roughly equivalent to the entire fleet of coal plants in the EU. The heart of the problem is that while some countries are continuing to decrease the share of coal in their energy mix, others are engaging in pathways to increase their coal dependency.
Action and urgency are key
AXA’s position on climate change requires regular innovation, accompanied by the setting of even more ambitious objectives. For these reasons, AXA has strengthened its coal strategy.
AXA’s 2019 Coal Policy underlines its 2017 “no new coal” message, which is in full alignment with the UN Secretary-General’s statement at the Climate Action Summit in September 2019, appealing for no new coal power plants to be built after 2020.
In terms of investments, AXA’s new coal policy imposes even more stringent exemption limits, restricting investments in electric utilities that have a coal-based energy mix of over 30% and/or coal power expansion plans of over 300MW (vs 3000MW since 2017). This new threshold will rule out investments in most new coal projects around the world. Furthermore, since 2017, AXA does not invest in mining companies where coal accounts for more than 30% of their revenue and/or that extract over 20MT of coal annually. Now this is complemented by a new ban on power generation companies with more than 10GW of installed coal-based power production.
A coal divestment strategy must be accompanied by policies to restrict the underwriting of coal-based power generation assets. In this regard, AXA is extending its existing ban on underwriting new and existing property and construction businesses with any coal-related project, to now include restrictions at client-level, and for any Line of Business, with companies that derive more than 30% of their turnover from coal; have a coal-based energy mix of over 30%; or mines that extract more than 20MT of coal annually. Other specific restrictions also apply.
Taking the long view: a complete coal exit
In addition to AXA’s new investments and underwriting restrictions, the Group is making a commitment to a long-term coal "exit” strategy, reducing its exposure to the thermal coal industry to zero by 2030 in the European Union and OECD countries, and by 2040 in the rest of the world. This is in line with the pathways recommended in the main climate scenarios. In practice, this means reaching a 0% global turnover from coal-related investments and underwriting by 2040.
A difficult but achievable goal
Coal is not a problem of the past. Estimates expect hundreds of new coal-fired power plants to be built across the world, which would not only add to already excessive carbon emissions, but would lock-in infrastructure in many countries to carbon-intensive pathways for decades to come. In short, current worldwide coal strategies are wholly inconsistent with climate goals.
Nevertheless, a rapid energy transition is possible. Indeed, a shift to low-carbon energy and greater energy efficiency measures can help put the world on track towards the necessary carbon reductions. What’s more, although there are certainly costs involved in transitioning away from coal, this expenditure will likely be dwarfed by the costs incurred in the future as a result of insufficient action.
This is why AXA’s new climate strategy takes a comprehensive approach, not only excluding coal investment and underwriting, but also implementing the following:
- launching AXA’s Transition Bonds, a new type of bond used exclusively to finance energy transition projects, encouraging the move towards low-carbon energy technologies;
- committing to align its investments with the Paris Agreement and to achieve a 1.5°C warming potential by 2050.
- A doubling of its green investment target from €12bn in 2020 to €24bn in 2023.