‘Really Withering Engagement’: Axa delivers kick up derrière to green investing

A logo of insurer Axa is seen at the entrance of the company’s headquarters in Brussels, Belgium March 5, 2018. REUTERS/Yves Herman

Axa has given green investing a helpful kick up the derrière. The French insurer has dumped RWE as a client and will no longer invest in its shares due to an insufficiently rapid exit from coal, Bloomberg reported on Friday. It’s harsh on the German utility, but probably good for reducing carbon dioxide emissions.

Green investors are split between those that advocate dumping shares of climate sinners, and those who prefer using their holdings to pressure companies to change their behaviour. Divesting carries the risk of selling to a new owner less bothered by climate change, which is why fund managers like BlackRock have tended to oppose it. Yet holding on can allow companies to drag their feet.

RWE is an odd candidate for the chop. True, two of the group’s power stations which burn brown coal are Europe’s second and third dirtiest for emissions, according to the European Environment Agency. But Barclays analysts reckon its 22 gigawatts of planned wind turbines and solar panels make it the continent’s third biggest renewable energy utility after Enel and Iberdrola. Hence the company can pledge to have net zero emissions by 2040 – a decade quicker than other big fossil fuel companies which Axa remains free to invest in, like oil group Total. The Science-Based Targets Initiative, a kitemark for corporate green objectives, reckons RWE’s target is credible.

On the other hand, even BlackRock has warned it might sell shares in companies with big exposure to coal, a particularly heavy source of carbon. Axa’s policy requires it to avoid any company in a developed economy that doesn’t exit coal by 2030. Big lenders BNP Paribas and HSBC take a similar approach. Unlike Iberdrola and Enel, RWE fails that test.

The risk is that RWE responds to its rough treatment by offloading its dirty assets to a less responsible owner. But Axa’s actions could equally encourage it to find a way to decommission its brown coal power stations more quickly. The move also delivers a powerful message to companies like Royal Dutch Shell, whose 2050 net zero target hinges on untested ways to remove carbon from the air. If even a relative climate saint-like RWE can fall foul of investors, others will also brace for a boot in the backside.