Barramundi gives BHP the flick

Fisher's listed Barramundi fund, which invests in Australian shares, has sold out of mining giant BHP as the stock nudged 52-week highs on the ASX this month.

But the decision wasn't based on value. Instead, Barramundi told investors it had "drawn a line in the sand" over BHP's continued production of thermal coal ¬– burnt in power stations to generate electricity.

In a letter to investors, senior portfolio manager Robbie Urquhart said Barramundi had sold out of BHP because it was deemed to be in contravention of the fund manager's responsible investing policy.

"When we built our positions in BHP and Rio Tinto in 2016, both companies were producers of thermal coal," Urquhart wrote.

"At the time it looked to us as if they were actively exiting their thermal coal operations. For this reason, we felt both companies were permissible holdings under our Responsible Investing Policy. Since then, Rio Tinto has exited thermal coal completely, selling its last mine in 2018 and we continue to maintain a shareholding in the company.

"While BHP had exited a number of thermal coal assets when it de-merged the South32 operation in 2015, it has, however, hung onto its remaining assets in Colombia and Australia. Recent commentary from the company indicates that it is happy with its remaining thermal coal exposure. This was a big red flag for us.

"So, notwithstanding that we still regard BHP's portfolio of businesses and management team highly, we have drawn a line in the sand. Until the remaining thermal coal assets are disposed of, we will no longer be investing in BHP's shares."

That's a bold move from Barramundi and one that more and more fund managers are making. The New Zealand Super Fund has shown the way in many respects, putting its own line in the sand on weapons manufacturing and other unethical investments.
Barramundi is following a worldwide trend when it comes to thermal coal.

Australia's largest insurer, QBE, is about to stop insuring any new thermal coal projects and will get out of coal entirely by 2030.

And thermal coal prices plummeted earlier this month to multi-year lows, before recovering.

Barramundi investors will no doubt be keeping a sharp eye on that BHP share price.

The stock is up nearly 18% in 2019, and recently traded at $A38.50.