Some 86% of coal mining companies are ‘misaligned’ with the goals of the Paris Agreement, according to new research by the Transition Pathway Initiative Centre (TPI Centre) at the London School of Economics and Political Science (LSE).
According to the TPI Centre’s research, this misalignment spans short-, medium-, and long-term timelines, and is particularly prevalent in emerging market and developing countries.
Some 42 coal mining companies around the world were assessed as part of the report, of which 30 operate in emerging market and developing economies, including China, India, and Indonesia.
A critical role
‘Emerging market and developing countries have a critical role in the global coal transition, as many of their economies remain heavily dependent on coal for energy security and industrial growth,’ the TPI Centre noted. ‘Countries such as India, Indonesia, and China continue to expand coal capacity as they pursue economic development, even while facing growing pressure to accelerate decarbonisation.’
While some of the companies assessed in the research are aligned with the ‘below 2°C’ benchmark, the TPI Centre said that ‘minimal progress’ has been made towards the more ambitious 1.5°C goal, with just two firms achieving 1.5°C alignment across all timeframes, and in both cases, this was only due to selling off their coal assets.
This disconnect comes at a time when global coal use continues to rise, with coal consumption hitting a record 8.77 billion tonnes last year.
According to the International Energy Agency, countries outside China will need $1 trillion in clean energy investments by 2030 to securely transition away from coal, in order to achieve the IEA‘s Net Zero Emissions by 2050 Scenario, which targets a complete phase-out of unabated coal-powered electricity generation by 2040.
The role of governments
“Government policies, along with financing from multinational, local and private sources, are critical to enabling developing economies to phase out coal in transition to a just, sustainable and low-carbon economy while safeguarding economic security and stability,” commented Ali Amin, policy fellow at the TPI Centre, LSE. “When overlaying the company emissions data with our country assessments, we identify where transition investment may be most needed, including renewable opportunities in markets such as China, India, the Philippines and Indonesia.”
Along with its findings, the TPI Centre has also created a new methodology to assess the carbon performance of coal mining companies, which can provide investors with insights into how well these firms are aligning with global climate objectives.
“Green financing and climate-aligned investments are essential to support a just transition in coal-reliant economies, especially for emerging markets in Asia,” added Jason Mortimer, head of sustainable investment – fixed income at Nomura Asset Management. “The TPI Centre’s standardised metrics enable objective and comparable assessments across sectors and portfolios and are a crucial tool for investors like us to price climate risks, identify opportunities and facilitate engagement.” Read more here.
