Amundi favors State Bank of India green bonds over financing of coal mines

Amundi has decided to remove exposure to green bonds issued by the State Bank of India (SBI) from its Planet Emerging Green One fund, Citywire selector has learned.

The move follows a review of the company’s holdings after it was revealed that the bank’s green bonds were tied to funding for the Carmichael thermal coal mine in Australia.

The € 1.49 billion Amundi Planet Emerging Green One fund, which had a 1.4% allocation of green bonds to the SBI in June 2020, is designed to invest in green bonds, whose issuers comply with industry ESG standards and adhere to best practices.

Amundi said it contacted the bank and wrote a letter to management to highlight the contradictory nature of the investment in the Australian coal mine, which was described by Rolling stone magazine as “the craziest energy project in the world” because of the damage it is likely to cause to the Great Barrier Reef.

NNIP and AXA IM join the green exodus

The French asset manager is not the only firm to take decisive action. On December 17, NNIP fund manager Cityiwre, rated A, Bram Bos, posted a post on Linkedin, stating that the company had downgraded the bonds of a “big Indian bank” as non-green, making them ineligible for the asset manager’s green bond portfolios.

“Although this bank has issued ‘green’ bonds, it appears to be granting a loan to Adani to finance the Carmichael coal mine in Queensland / Australia.

“While they wouldn’t go ahead with the controversial loan, the bank’s policies don’t support us to help us switch to clean energy in the future and make their green bond a form of “Greenwashing” in our opinion. What is also very worrying is their lack of openness and their reluctance to engage with investors! ‘ Bos said in the message.

When approached by Citywire selector, a spokesperson for NNIP said the company could not say whether the bonds had been sold and what the fund’s exposure was. They added that the statement concerned the downgrade of the issuer’s rating.

AXA IM, which manages the AXA WF Global Green Bond fund, confirmed to have removed its exposure to SBI at the end of November.

The firm could not specify the extent of its allocation. A spokesperson said Citywire selector it regularly monitors investments in order to ensure that they are in line with its commitments within the framework of responsible investment processes.

“After reviewing SBI’s environmental practices, we noticed their potential involvement in the Carmichael coal project in Australia,”

“We were concerned about this kind of developments which we consider not aligned with the necessary energy transition”, added the spokesperson.

What’s next for green bonds in emerging markets

The controversy surrounding the coal financing links of green bonds issued by the State Bank of India demonstrates one of the great challenges for emerging debt investors with a sustainable lens.

Thede Ruest, Head of EMD at Nordea, said Citywire selector that his team demanded that green bonds be part of an issuer’s overall transition strategy, which was not the case with SBI.

“The involvement in the Carmichael coal mine -” The craziest energy project in the world “to quote Rolling stone magazine – underlines the absence of a transition strategy at SBI. ‘

“It may have been less visible to some before the current developments. In this context, we are very happy to see that other green bond fund managers now also realize the absence of this comprehensive transition strategy and sell their holdings. ‘

Ruest said he and his team are in the final stages of launching his emerging markets-focused Global Green Bond Fund, which will go live in early 2021.

He added that the fund will not invest in all green bonds and that not all of his team’s investments will be green bonds despite being a green bond fund.

“For example, we think green issuers don’t need to demonstrate that they are green, but we can still use them in our future Global Green Bond Fund – for example, ReNew Power, we consider an ‘issuer of green bonds ”as it is 100% solar and wind power.

“As in the case of SBI, we ask green bond issuers to have a comprehensive transition strategy and reject bonds that do not have this issuer ambition.”

The fund manager said his team supports a green transition even for most so-called brown issuers, but some shades of brown will never be able to accept.

“For example, we would not invest in arctic drilling or in companies that do not respect aboriginal rights.

No matter how managers interpret green bonds, coal projects definitely pose a threat to ambitious climate goals.

Andreas Bjørbak Alnæs, senior advisor on sustainable investments at Storebrand Asset Management, said the Carmichael coal mine undermines actions to meet the goals of the Paris Agreement.

“Burning coal will emit billions of tonnes of carbon into our atmosphere and negatively impact vulnerable habitats and natural resources.

“We have contacted the SBI to express our concerns over the controversial Carmichael coal mine in Australia and we expect them to shoulder their responsibilities and not extend the loan,” he added.

Bjørbak Alnæs said transparency is essential and responsible investors must act on the basis of the information they have.

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