Allianz Plans to Sell Coal Holdings in Response to Climate Change Concerns: CIO

By and Weixin Zha | November 24, 2015

Allianz SE is turning its back on coal as returns evaporate from energy generation that is harmful to the environment.

Europe’s largest insurer plans to exit holdings in mining companies and utilities that derive more than 30 percent of their sales or power supply from the fossil fuel, Chief Investment Officer Andreas Gruber told German television station ZDF in an interview. Allianz will sell its shares in those companies in the next six months while holding their bonds until maturity, Gruber said in an excerpt of the interview to be aired on Tuesday evening. Spokesman Nicolai Tewes confirmed the accuracy of the report.

Allianz is following the lead of other asset managers that have recently put their fossil fuel investments into question. Norway’s $900 billion wealth fund was banned by the country’s parliament from coal investments in May and Blackrock Inc. said in October that it may convert an existing fund that would eliminate client exposure to fossil fuel assets.

Money managers’ dislike for coal comes in the wake of efforts to curb use of the fuel amid a global commodity rout that has sent European coal prices plunging to their lowest level in at least 8 years, according to Bloomberg data going back to 2007. Allianz took its decision ahead of the world climate summit in Paris, starting Nov. 30, as Group of 20 nations gather to reach a global agreement on how to reduce fossil fuel use.

Climate Summit

“We want to support the talks at the climate summit in Paris in December, but also send a signal for our industry and for capital markets,” Gruber said.

Companies that produce carbon dioxide, the gas blamed for climate change, are saddled with rising costs as governments charge them for emissions. Shares of RWE AG, Germany’s largest power producer, have slumped 58 percent this year as it struggles to rebalance its power mix amid the country’s policy shift toward renewable energy. More than 40 percent of the company’s power-generation capacity is based on hard coal and lignite, according to figures posted on RWE’s website in November.

The share slump makes RWE the biggest loser in the benchmark DAX Index of 30 biggest German companies, which has gained 12 percent since the 2014 market close.

Allianz has about 4 billion euros ($4.25 billion) of investments in companies with coal-intensive operations, ZDF reported, citing unidentified people familiar with the industry.

The insurer has invested about 2 billion euros in wind power and plans to double that figure in coming years, Gruber said, adding that Allianz expects to generate a return of 5 percent to 6 percent for its clients from this source, according to ZDF.

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