A growing shift to sustainable investing — highlighted by BlackRock Inc.’s recent commitment to sustainability — will make it increasingly tricky for the coal industry to find funding, suggests Moody’s Investors Service.
On Tuesday, BlackRock pledged to step up its commitment to investing sustainably by, among other measures, purging its active investment portfolios of companies that generate more than 25% of their revenues from thermal coal production.
BlackRock also said that environmental, social and governance (ESG)-driven benchmarks should exclude businesses with high ESG risks, such as coal businesses.
In response to BlackRock’s announcement, Moody’s sounded the alarm about the impact of the growing demand for sustainable investing on the coal industry.
“We see an emerging credit issue for the coal industry regarding access to capital,” Ben Nelson, Moody’s lead U.S. coal industry analyst, said in a statement.
“While an increasing number of banks and investment firms have signalled an intent to move away from coal over the past few years, a drop in coal prices is compressing cash flow generation and debt trading prices are meaningfully weaker today,” Nelson added.
“We expect these developments will push coal companies to express more financial conservatism in 2020.”