Credit:<\/span>Arsineh Houspian<\/cite><\/p>\nIFM\u2019s global head of infrastructure Kyle Mangini said there is \u201crelatively little debate\u201d on the outlook for thermal coal \u2013 an energy source that governments around the world are rejecting in the quest to reduce carbon emissions and transition to renewable energy sources.<\/p>\n
\u201cWe acknowledge that it is part of the energy mix today but it will be phased out of the energy mix over time, and from that perspective, it\u2019s not a sound long-term investment,\u201d Mr Mangini said. \u201cWe put the blanket exclusion on coal really because of the view it\u2019s not viable and that needs to be addressed sooner rather than later.\u201d<\/p>\n
Major investment firms have set net zero emissions targets in recent years and are now using either divestment – selling out of carbon-heavy assets- or engagement – remaining invested to advocate for change – to achieve these goals.<\/p>\n
IFM\u2019s remaining exposure to thermal coal is limited to the Polish district heating business bought in 2006. But the fund manager owns other carbon-heavy assets including North American oil and gas infrastructure projects Colonial Pipeline and Buckeye Partners. Chief executive David Neal said there were no plans to sell these assets to meet decarbonisation targets.<\/p>\n
\u201cWe\u2019re really focused on transition rather than divestment,\u201d Mr Neal said. \u201cSo what can we do to help the assets in the oil and gas sector at the right time and in the right way transition to support the new cleaner economy? There is a lot of opportunity to do just that.\u201d<\/p>\n
\u201cDivestment might get the emissions down in our portfolio but it does absolutely nothing for the planet\u2019s emissions and it certainly does not help the global economy. This is about being a responsible investor.\u201d<\/p>\n
IFM\u2019s interim targets include reducing scope one and two emissions (direct emissions and emissions from electricity use) across infrastructure assets by 40 per cent by 2040. This will be achieved, for example, by encouraging its airports and ports to install solar panels or diversify operations to include clean energy projects.<\/p>\n
Reducing scope 3 emissions is not part of IFM\u2019s climate plan, which includes indirect emissions like those from airplanes using IFM\u2019s airports or gas passing through IFM\u2019s pipelines. Mr Neal said these were \u201cincredibly important\u201d to understanding long-term risks but were outside IFM\u2019s \u201cdirect influence and control\u201d.<\/p>\n
\u201cThe more people are concerned about the emissions that come from flying, the less airports get used. Those sorts of things,\u201d he said. \u201cThere\u2019s a difference here between what we\u2019re worried about and what risks we\u2019re managing.\u201d<\/p>\n
The International Energy Agency in May released a report claiming there could be no new oil and gas projects if the world was to achieve net zero emissions by 2050. Mr Neal said retaining its oil and gas assets would \u201cin many cases but not exclusively\u201d rely on the development of new technologies or carbon offsets.<\/p>\n
Mr Mangini added the oil and gas sector would play a \u201creally important stabilising role\u201d for the adoption of renewable energy until \u201cstorage capability is built into the system more broadly\u201d.<\/p>\n
\u201cThe fact you can generate [energy] now with a renewable source that is less expensive than fossil fuels means you don\u2019t require government subsidies in many cases is a huge development. Now you have investment being led by the market instead of being led by the government,\u201d he said. \u201cThere has been tremendous progress, there is so much RND [research and development] I feel very optimistic we will see a lot more progress.\u201d<\/p>\n
Nationals MP George Christensen last week accused the major banks of \u201ccaving\u201d to international investor pressure when making decisions to phase out exposure to thermal coal. Mr Neal also rejected any \u201cpressure\u201d from investors and said decarbonisation was rather a collaborative approach to managing investment risk.<\/p>\n
\u201cI think we are all on this same journey. Our investors are working through how is their long-term risk being managed? How are the opportunities from this massive energy transition that\u2019s going to occur over the next couple of decades, how are those opportunities being embraced?<\/p>\n
\u201cThere\u2019s no doubt those engagements are much more intense than they used to be. There\u2019s huge momentum across the investment world in understanding how climate risk can be managed.\u201d<\/p>\n
IFM will soon release interim decarbonisation targets for the remainder of its $174 billion portfolio including listed equities, private equity and debt.<\/p>\n
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. <\/i><\/b>Sign up to get it every weekday morning<\/i><\/b>.<\/i><\/b><\/p>\nMost Viewed in Business<\/h2>\nFrom our partners<\/h3>\n
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