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Who owns the Coal? A detailed analysis of who has effective control of the world’s listed coal companies January 2017 21 Who Owns the Coal? A detailed analysis of who has effective control of the world's listed coal companies Contents Summary ............................................................................................................................................... 2 The Carbon Ownership Chain ............................................................................................................... 3 InfluenceMap's Finance Project ............................................................................................................. 4 Coal Ownership Trends ......................................................................................................................... 5 Focus on the Listed Funds .................................................................................................................... 6 Asset Owners: Who's Divested .............................................................................................................. 8 The Japanese Connection ..................................................................................................................... 9 Appendix A - Which Funds Own the Coal ........................................................................................... 10 Appendix B - The Coal Top 100 .......................................................................................................... 11 1 WHO OWNS THE COAL OCTOBER 2016 21 Summary n A recent 2 WHO OWNS THE COAL OCTOBER 2016 21 The Carbon Ownership Chain The effective or beneficial owners of all of society's financial assets must be individuals, as opposed to legal entities who may be the registered owners. On this basis an ownership/investment chain can be constructed tracing various types of individuals on one side of the chain with the physical assets, like coal reserves and associated infrastructure on the other. In the middle lie a variety of operating companies, financial intermediaries and public sector institutions. The following info-graphic shows the range of actors in the chain. The nature of the chain will vary with geography and changes with time. For example in China, the majority of Registered Owners of coal assets are government entities. In the US currently, a large chunk of the coal sector is registered in the name of Private Equity and High Net Worth Individuals. This general analysis is universally applicable and is a useful starting point in understanding how the investment and finance system can alter the manner in which the carbon assets are managed. 3 WHO OWNS THE COAL OCTOBER 2016 21 InfluenceMap's Finance Project In theory, the beneficial owners in the chain above should be able to exert their rights and interests through the chain to ensure their values and interests are reflected. A major underpinning of the theory of change of sustainable finance as it applies to climate change hinges on the beneficial owners like pension and insurance beneficiaries and individual savers having their collective voice heard when it comes to management of the carbon assets by the operating companies like Shell and BHP Billiton. There are two major barriers. n The two sides of the chain above contain numerous intermediaries and the positions of the beneficiaries are dispersed and not efficiently communicated through the chain. n Information on who owns precisely what in the chain is not well disclosed and what is disclosed is not aggregated in a publicly available manner allowing the beneficial owners to communicate their values. InfluenceMap's Finance Project aims to shed light on the second of these two barriers by forensically tracking and aggregating the data that is available in the entire chain, globally from legal disclosures and making this available to the investment and campaign communities and the general public. Some very important information issues should be noted. n The ability to track registered owners of coal and other stocks is limited by disclosure requirements. In general asset owners (as opposed to asset managers or listed funds) are not required to disclose their holdings.1 n Asset managers (who charge fees to manage external money) are required to declare their holdings on a quarterly basis, as are listed funds in most countries.2 n Tracing ownership to asset owners is difficult as they often award mandates to manage their assets to investment managers (like Blackrock, in whose name the shares are registered) or buy listed funds rather than individual stocks. n A concern of the climate community is that monies divested from coal production equities may be reinvested elsewhere in the coal value chain, such as utilities or transport. Our data will expand to these sectors analysing the coal exposure in each company and ownership trends as relevant. With these caveats in mind, we initiate our project on the coal production sector. Our full interactive table can be found online whereby users may filter for region, value metric and size of investor. 1 The SEC requires insiders and individuals with 5% or more of a company to declare holdings (13-D, 13-G, 14-A). 2 The SEC, for example, requires asset managers with over $100m AUM to declare, via the 13-F process. 4 WHO OWNS THE COAL OCTOBER 2016 21 Coal Ownership Trends Divest/Invest has been a major theme of the climate movement in the past decade with numerous asset owners pledging to divest from the coal and other fossil fuel sectors in various ways and according to a range of time scales. A key objective of InfluenceMap's Finance Project is to create objective metrics to measure these divest pledges, with an initial focus on coal. We examine 100 of the largest listed coal companies responsible for over 50% of the production of thermal coal globally (6.62 billion tonnes)3. To put this in perspective the production from these 100 companies represents roughly 20% of annual global CO2 equivalent GHG emissions from man's activities when it is combusted for energy generation.4 World Thermal Coal Producon 100 Listed Companies Private Russian Companies Other Chinese companies State Owned European and Asian Companies Private and Small US Coal Companies Other In this report, we merge two data sets using smoothing and querying algorithms to ensure consistency and remove spurious data points.5 n Financial disclosures in 20 legal jurisdictions relating to the holdings of listed funds (ETFs, mutual funds, investment trusts etc.). n The annual reports and regulatory submissions of the 100 coal companies providing data on revenue, coal production, coal reserves and the proportion of sales the companies derive from thermal coal production. 3 International Energy Agency data, 2016, includes lignite coal production, which is primarily used in electricity generation. 4 International Energy Agency data, 2015, excludes land use emissions. 5 In the process we analysed over 40 million data points over a period 2010-present. 5 WHO OWNS THE COAL OCTOBER 2016 21 Coal ownership may be measured from a variety of viewpoints and we offer users several metrics with which to filter the most coal intensive funds. n Value of the coal holdings - in our metrics we temper this by multiplying by the % of revenue the company gets from thermal coal6 in order to avoid attributing the entire value of diversified companies to the tally. n Value of the coal holdings as a percentage of total assets under management - we generally consider equity-only funds so this is a straightforward ratio. n Coal production owned - if the fund owns a % of the coal company we in turn attribute this annual coal production to the fund-owner. n Coal reserves owned - if the fund owns a % of the coal company we in turn attribute this yet-to- be-combusted coal to the fund-owner. The coal-related metrics above are useful as they can easily be converted to greenhouse gas emissions equivalent if the user is interested in this climate perspective. In addition, given the recent collapse in the value of coal companies the coal-metrics may be a more indicative one to judge changes in the coal intensity of an asset owner's holding. Focus on the Listed Funds In this initial report we examine a key part of the Registered Owners aspect of the chain - Listed Funds. These funds now control over 50% of the value of stock markets globally and make up the majority of most individuals' savings, pensions and investments. In this study we assessed 50,000 of the world's largest listed funds and linked them to investment management companies like Blackrock and the Vanguard Group to detect common ownership patterns. Listed funds are generally required to disclose their positions (that is, what they own) to financial regulatory authorities like the Securities and Exchange Commission in the US, each quarter so good data is available in principle. Listed funds are increasingly becoming the core of investment and ownership of assets by individuals. Clearly these funds are in turn owned by other parts of the Ownership Chain and ultimately the individual beneficiaries. Due to the relatively clear disclosure requirements and wide ownership, this presents a useful start to analyse trends and patterns in ownership of the global coal assets. Our data shows that 60% of the value of the 100 top listed coal companies are owned by listed equity funds. These include a range of funds - passive tracking funds, actively managed, thematic funds etc. Due to hugely varying coal company valuations

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