AG2R La Mondiale published last month their climate policy including new specific measures on the coal sector. With only two months left for French financial institutions to adopt an exit policy for the coal sector, we review AG2R La Mondiale’s policy, published online two months ago.
On July the 2nd 2019, the Paris Financial centre, through the professional federations, undertook to ensure that its members – banks, insurers and investors – would adopt a strategy for a global withdrawal from the coal sector by mid 2020. The final objective stated in their communication: contribute to achieving carbon neutrality by 2050.
Two months before the deadline, the track record remains meagre: AG2R La Mondiale is only the 5th French institution to honor its promises. The insurer, exposed to coal through its investments, joined Crédit Agricole, La Banque Postale Asset Management, AXA and Crédit Mutuel.
The measures adopted by those 5 studious pupils of the Paris financial market differ. Nevertheless, structuring trends are emerging. AG2R La Mondiale’s policy gives us the opportunity to dissect the necessary ingredients of a coal exit policy:
- First of all, right exit horizons are essential. According to Climate Analytics, European and OECD countries should no longer produce electricity from coal after 2030, and other countries should also exit from this polluting energy by 2040. AG2R La Mondiale aims at an exit by 2030, which can be explained by its mainly European investment scope. However, as explained in the last point, meeting this objective will force AG2R La Mondiale to push some companies such as Engie to close its coal-fired power plants outside Europe or OECD by 2030.
- Exclusion from all financial services of companies planning the construction, development or acquisition of coal power plants, mines or infrastructures. The Global Coal Exit List (GCEL) names over 400 of these companies, and the criteria is based on common sense: if you have to get out of coal, companies going in the opposite direction do not deserve to be supported. AG2R La Mondiale seems to understand this.
- Exclusion of companies that are too exposed to coal to get out within the time frame set by climate science. AG2R La Mondiale excludes companies that derive more than 25% of their revenues or power production from coal; those that have more than 10 GW of coal-fired power generation capacity or that produce more than 10MT of coal per year. These criteria don’t exactly match our recommendations, but AG2R La Mondiale is committed to reviewing them downwards every two years, in order to achieve zero exposure by 2030.
- Lastly, AG2R La Mondiale calls on the remaining companies in its portfolio to adopt a closure plan for their coal assets during 2020, aiming towards a complete exit by 2030. Among the companies concerned are two of the leading European operators: Engie and Enel. This measure might be tricky regarding the latter, as both operate numerous coal-fired power plants, including several plants outside Europe or the OECD for Engie.
By adopting these criteria, AG2R La Mondiale is firmly set on a coal exit trajectory aligned with Paris. In addition, it should be noted that AG2R La Mondiale uses the reference database: the Global Coal Exit List, to identify which companies are active in the coal sector. This database, already used by several financial institutions such as AXA, Crédit Mutuel, Zurich and La Banque Postale Asset Management, is recommended in the best practice guides published by The French asset management association (Association Française de la Gestion financière – AFG) or the French Insurance Federation (Fédération Française de l’Assurance – FFA).
To date, only 5 out of the hundreds of French financial institutions have so far followed the commitment made on July 2nd, 2019. Others have tried to do so, such as Société Générale or BNP Paribas, but their commitments remain insufficient to put them on a path to exit coal in line with the Paris objectives. They still have two months to change that situation.