Why the City made a mistake in writing off coal

For anyone tempted to believe warnings from Mark Carney and other City figures about ‘stranded assets’ in the fossil fuel industry, while simultaneously buying the idea that renewable energy is the investment which can’t go wrong, here is a cautionary tale. Just over a year ago the mining giant Anglo American demerged its thermal coal division into a new company, Thungela Resources. At the time it seemed to some a bit like Northern Rock being divided into a ‘good bank’ and a ‘bad bank’. Here was a chance for Anglo American to cleanse its image by disposing of the nasty, climate-unfriendly part of its operation – the bit which many saw as doomed – and perhaps avoid some of the protests and legal actions which environmental campaign groups have been waging against fossil fuel businesses.

Analysts were not enthusiastic about the prospects for the new company. Boatman Capital – which specialises in identifying targets for short-sellers and which had previously attracted scorn by publishing a critical report on military outsourcing company Babcock International, although that report did foresee problems at the company – published a report valuing Thungela Resources at precisely zero.