Press release: 27 July 2022
ClientEarth alerts Cumbria coal mine financier to legal risk
The private equity firm financing the proposed Whitehaven coal mine is leaving itself open to legal challenge in continuing to support the controversial project, ClientEarth lawyers have cautioned.
Through a controlling interest in the West Cumbria Mining group, the mine is owned by a Cayman Islands private equity fund managed by EMR Capital. In a letter to the firm, ClientEarth warned that the fund’s ongoing investment in Whitehaven puts EMR Capital at risk of breaching the duties it owes to investors in the fund.
A planning permission decision on the mine, which will extract coking coal for steel making, is expected from the UK Government in August after facing widespread opposition over the project’s significant harmful climate impact.
Robert Clarke, lawyer at ClientEarth, said: “The Whitehaven coal mine is the very definition of a future stranded asset. Even if it were to get permission, demand for coking coal from UK and EU steel makers will continue to dry up as the industry moves away from fossil fuels.
“That leaves serious questions as to whether EMR Capital is exposing the fund and its investors to such foreseeable financial risk unreasonably and unnecessarily.
“EMR Capital owes an explanation to its investors as to how continued support for the project is compatible with their best interests, which it has a legal duty to protect.”
ClientEarth also pointed out that EMR Capital’s support of the mine is squarely at odds with its public commitments to support global climate goals and meet responsible investment standards, including as a signatory to the UN Principles of Responsible Investment.
Under West Cumbria Mining’s proposals, up to 2.78 million tonnes of coal would be produced for the steel industry per year until the mine’s scheduled closure in 2049, despite the global need to urgently phase out coal to avoid climate catastrophe.
A landmark report from the International Energy Agency stated that “no new coal mines or extensions of existing ones are needed” on the road to net zero, adding that existing sources of coking coal production are sufficient to cover demand through to 2050.
The Government’s top climate change advisor, Lord Deben, said that approving the mine would be “absolutely indefensible”.
Clarke added: “The Whitehaven coal mine spells disaster for the climate and the UK’s emissions reduction targets. EMR Capital cannot credibly claim to be investing responsibly and supporting global climate goals when it is funding a project that so clearly undermines both.”
ClientEarth reminded EMR Capital that there are legal liability and regulatory consequences that may stem from misleading communications to investors. It added the firm should carefully consider whether it has properly reported on its approach to the climate-related risks and impacts associated with the mine to investors.
The letter also pointed out that investor scrutiny of metallurgical coal investments is rising sharply, highlighting the example of the University of Pittsburgh’s $5.65 billion endowment fund, which recently pivoted away from metallurgical coal due to stranded asset concerns.
“Investors are very much alert to the economic and commercial risks associated with new coal projects like the Whitehaven mine – and expect their asset managers to identify and properly manage those risks. Any fund investing in such risky projects should be prepared to justify its investment decisions,” Clarke said.
Notes to editors:
- Cayman Island’s private equity fund EMR Capital Resources Fund 1 LP is the majority owner of the West Cumbria Mining (WCM) Group and the Whitehaven mine, having acquired its controlling interest in June 2014. The fund owns the WCM Group holding company called EMR Capital Investment (No.3B) Pte. Ltd, which holds approximately 81% of the equity in West Cumbria Mining (Holdings) Limited.
- EMR Capital Resources Fund 1 LP is controlled and managed by entities in the EMR Capital group on behalf of its third-party investors. EMR Capital is a private equity firm with entities and offices in the Cayman Islands, Australia and Hong Kong.
- EMR Capital has made a public commitment to responsible investment as a signatory, since February 2020, of the UN Principles of Responsible Investment. This includes a commitment to incorporate ESG issues (including climate change) in investment analysis and decisions.
- In its own ESG policy, EMR Capital claims to support the climate objectives of the Paris Agreement “through a focus on reducing greenhouse gas emissions and efficient energy use”.
- The letter can be found here.
ClientEarth is a non-profit organisation that uses the law to create systemic change that protects the Earth for – and with – its inhabitants. We are tackling climate change, protecting nature and stopping pollution, with partners and citizens around the globe. We hold industry and governments to account, and defend everyone’s right to a healthy world. From our offices in Europe, Asia and the USA we shape, implement and enforce the law, to build a future for our planet in which people and nature can thrive together.