Coutts Joins CO2 Divestment Trend

Tom Burroughes

25 June 2020

announced yesterday that it has targeted a 25 per cent cut in carbon emissions in its funds and portfolios by the end of 2021.

According to its newly launched 2020 Sustainability Report, the UK private bank declared that it had logged a 23 per cent fall in C02 emissions from its Coutts Invest funds during 2020. It aims to reduce such emissions by half across its holdings by 2030.

The UK bank said that it has excluded four areas from its direct investments: thermal coal extraction; thermal coal energy generation; tar sand; arctic oil and gas exploration.

“We invest with purpose and integrity, and with a keen focus on sustainability. It’s extremely important that we do this well. It’s not enough to simply sit back and do nothing to make it worse. We all have to do something tangible. Defeating climate change, for example, isn't about what we believe, it's about what we do,” Mohammad Kamal Syed, head of asset management at Coutts, said.

Activists are putting pressure on bank clients and others to lobby lenders into stopping support for carbon-based energy production. A group called Fossil Banks has a website covering scores of banks which it encourages clients to contact. The group says it is co-ordinating with organisations such as Friends of the Earth, The Sierra Club, and Les Amis de Terre France (Friends of the Earth France). Such action reflects widespread calls in academia, non-government organisations and government for public and private sectors to phase out fossil fuels.

There is fierce political debate on how fast change can be achieved, given the conversion costs and viability of alternatives such as renewables and nuclear power. Not everyone is convinced. Alex Epstein, founder of the US-based Center For Industrial Progress, wrote a book with the controversial title The Moral Case For Fossil Fuels. An issue for some investors is whether such a no-coal stance means that their portfolios will become more underweight in markets such as China, given that the world's second-largest economy has a large sector of coal-fired power stations, and possibly will add more.

The move is an example of how a range of wealth management firms are trumpeting their environmental, social and governance-themed (ESG) investment ideas. A theme has been divestment, raising the tricky subject of what to do about assets such as oil wells and coal mines left stranded as a result. In December last year, for example, Credit Suisse said it was no longer providing any financing to develop new coal-fired power plants. The European Investment Bank announced that it would not finance fossil fuel projects beyond 2021. In May 2019, ODDO BHF Asset Management announced that it was excluding coal investments from all its portfolios, equal to 12 per cent of its assets.