Our Responsible Investment overlays
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Coal Power
Research shows that coal power must be phased out globally by 2040 to meet the Paris Agreement's goal to limit global warming to 1.5°C. Historically, a coal-fired power plant has had an average lifespan of 46 years, which means that all new financing of coal-fired power plants is in direct conflict with the goals and timetable of the Paris Agreement. Since 2020 NAM has been the initiator and driving force behind a collaborative engagement urging companies to withdraw from the construction of a coal-fired power plant in Vietnam. Several leading Asian companies have now announced an end to future coal projects.
Engagement case: Vung Ang 2 We at NAM are critical towards any of our investee companies being involved in the construction of new coal-fired power plant projects, as this is inherently inconsistent with limiting global warming to below 2°C.
In 2020, we initiated a collaborative engagement with the financiers, owners and contractors of a new coal-fired power plant in Vietnam, the Vung Ang 2, with the aim of having the companies withdraw from the construction as well as to com- mit not to contribute to further coal-fired power expansion. This was due to our having identified the project as having high climate-related, financial and reputational risks and being inconsistent with the goals and timelines of the Paris Agreement. NAM is the leading investor of the consortium consisting of 25 investors and representing approximately EUR 4.8 trillion in AUM. The media interest for this engagement has been extensive and has contributed to an increased public opinion against Vung Ang 2 and coal in general. Several of the companies linked to the project have taken steps to reduce their involvement in the coal industry (see box), and our engagement also informed the climate debate in the parliament of the Republic of Korea, which ultimately led the government to set new net zero goals.
Companies that have responded
The project is an example of how we’re actively working with companies to ensure that they transition at the pace required to achieve a net-zero emission world by 2050. Phasing out coal from the energy sector is one of the most important steps to reach the goals set out in the Paris Agreement. Companies that have reacted to the letter from the con- sortium includes the owners Korea Electric Power Corpo- ration and Mitsubishi Corporation as well as the contrac- tor Samsung C&T, all announcing an end to future coal projects. In addition the financiers MUFG, SMFG and Muzuho have all introduced targets to reduce their financing of coal- fired plants to zero by 2040.
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