12
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World Coal
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June 2015
Industry View
Industry View
O
n 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:
n
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.
n
It fails to recognise an individual’s or
organisation’s freedom to choose their
investment portfolio.
n
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.
n
It has no concept of the free market
and the supply and demand market
of the global coal industry.
n
It totally ignores predictions from
recognised global energy institutions
(both private and government) for an
increase in coal demand for decades
to come.
n
It fails to recognise that developing
nations are indeed utilising – or plan
to utilise – coal as a major fuel in their
industrialised development.
n
It does not recognise that finance from
multiple sources is continuing to flow
into the global coal markets.
n
It does not recognise that new coal
companies are being formed across the
world each and every year.
n
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 gimic
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.
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.
THE MOST EXPENSIVE MARKETING GIMIC
Russell Taylor
