Could major super funds already divested from Whitehaven Coal start getting back in?

The top 30 super funds’ coal exclusion policies and investments in Whitehaven Coal

* Companies classified as ‘Coal and Consumable Fuels’ by the Global Industry Classification Standard (GICS) methodology are defined as: “Companies primarily involved in the production and mining of coal, related products and other consumable fuels related to the generation of energy. Excludes companies primarily producing gases classified in the Industrial Gases Sub-Industry and companies primarily mining for metallurgical (coking) coal used for steel production.” If Whitehaven was to primarily produce metallurgical coal, it could be reclassified under the ‘Steel’ sub-industry according to the GICS methodology and so become an eligible investment under Spirit Super’s and Super SA’s policies.

Each fund in the above table was contacted ahead of publication and given the opportunity to provide any further disclosures not captured by our research and raise any issues relating to our analysis.

Some funds’ policies failing to do the job

Commonwealth Super Corp (CSC) appears to be the only fund that could categorically re-invest its members’ retirement savings in Whitehaven if the company started generating significantly less revenue from the sale of thermal coal. CSC says it excludes investment in companies that “derive 70% or more of their revenue from thermal coal production and generation” on the grounds that they have “little prospect of transitioning.” Yet this weak threshold fails to account for the fact that companies like Whitehaven will attempt to use every dirty trick in the book to avoid transitioning, including buying metallurgical coal assets to pretend it is ‘diversifying’ its business while still pursuing several thermal coal expansion plans.

Source: Market Forces analysis of project regulatory documentation and Whitehaven disclosures. Assumes all currently proposed projects receive FID: Maules Creek extension, Narrabri Stage 3, full-scale Vickery, Winchester South, Blackwater North and Blackwater South.

Metallurgical coal: a problem for the climate and for super funds

It was ten years ago that HESTA became the first major Australian super fund to restrict investments in thermal coal companies. Fast forward to today, the majority of the industry (by assets under management), representing more than $1.3 trillion of members’ retirement savings, have followed suit.

Shifting our retirement savings away from dirty fossil fuel companies expanding production, like Whitehaven Coal, has likely had an impact on the company’s share price, with Whitehaven coal admitting as much in its remuneration report last year: “given the influence of ESG concerns on the Whitehaven share price, as a significant proportion of investors are unwilling or unable to invest in coal stocks resulting in significant valuation discounts and a disconnect of the traditional coal price to share price relationship.”

Along with major banks restricting lending to new coal projects and the companies building them, this has put pressure on undiversified thermal coal miners to rely on another type of coal to grow their businesses – metallurgical coal.

While thermal coal is used in electricity generation, metallurgical coal is used in steel production, and most super fund and bank exclusion policies apply to the former and not the latter.

Thus in the last few years we’ve seen some companies cutting thermal coal assets loose and focusing on growing their metallurgical coal business only, such as Mitsubishi and Anglo American.

In a manoeuvre to ‘transform’ itself into a majority metallurgical coal producer and again open itself up to debt finance from major banks and investment from Australian super funds, Whitehaven Coal purchased two metallurgical coal mines from BHP in October 2023.

However, this strategy still faces huge risks from the transition to a decarbonised economy. The climate impacts of metallurgical coal are the same as thermal coal, and in the case of methane content, metallurgical coal is often worse. Reaching global climate goals therefore means that metallurgical coal must stay in the ground as well.

In its Net Zero by 2050 scenario, the International Energy Agency assumes that “…existing sources of [coal] production are sufficient to cover demand through to 2050,” even though demand for metallurgical coal would fall at a slightly slower rate than for thermal coal.

For years, metallurgical coal was left out of financiers’ policies under the assumption that the technology for green steel production was unavailable, but this has changed with recent research finding that net zero emissions from the global steel sector by 2040 is now achievable.

It is therefore concerning that only one super fund has a policy in place that restricts investment in metallurgical coal companies. Even more concerning is that several super funds could re-invest their members’ savings in Whitehaven Coal based on their existing policies, despite the fact that Whitehaven has significant thermal and metallurgical coal expansion plans.