Research shows how banks, investors finance the coal industry
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On January 28, 2022, a bulldozer moves coal onto a conveyor belt in Jiangyou Power Station, Jiangyou City, Sichuan Province, China.
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LONDON — Banks and investors have channeled massive sums of money to support the coal industry in recent years, according to new research, propping up the world’s dirtiest fossil fuel at a time when humanity is facing a climate emergency.
Reclaim Finance and Urgewald, along with more than two dozen other non-governmental organizations, published an analysis Tuesday showing that $1.5 trillion was channelled by commercial banks to the coal sector between January 2019 and November 2018.
Research shows that a small number of financial institutions in a few countries have a significant role to play in maintaining the viability of the coal industry.
Indeed, financial institutions from just six countries — the U.S., China, Japan, India, Canada and the U.K. — were seen to be responsible for more than 80% of coal financing and investment.
Katrin Ganswindt from Urgewald’s financial research department stated in the report that “These financial institutions should be under fire by all quarters: financial regulators and customers as well as progressive investors.” We will be destroyed if coal financing is not stopped.”
The most polluting fossil fuel, coal is therefore one of the key targets for the transition to new sources.
Fog obscures Canary Wharf’s business district, including the global financial institutions Citigroup Inc. State Street Corp. Barclays Plc., HSBC Holderings Plc and No. 1 commercial office block. 1 Canada Square was located on the Isle of Dogs in London on November 05th, 2020.
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Which are the best lenders for coal customers?
These findings provide an overview of all corporate lending for Urgewald’s companies. Global Coal Exit ListHowever, green bonds are excluded and funding that is directed towards non-coal activities is not included. The GCEL is a group of 1,032 companies who account for 90 percent of global thermal coal production.
The update is the first GCEL financial research update since 2006. COP26 climate conferenceIt was held in Glasgow (Scotland) late last year. Campaigners argue that it should be used as a reference point to judge the honesty of the COP26 commitments.
While banks may like to say they wish to assist their coal clients in transition, reality is that most of these businesses are not transitioning.
Katrin Ganswindt
Urgewald’s Head of Financial Research
At the U.N., major coal-dependent states will be represented pledged for the first time to “phase down”Coal-fired power generation, inefficient subsidies for fossilfuels. Many were concerned that a last-minute change to the Glasgow Climate Pact’s terminology to say “phase down” instead of “phase out” would lead to a loophole for delaying urgently needed climate action.
Although banks like to say they want to support their coal clients’ transitions, the fact is that very few of these businesses are actually transitioning. Ganswindt explained that banks have no incentive to assist their clients in transitioning as long they keep writing blank checks.
According to NGOs, 376 commercial banks provided loans totalling $363 billion to the coal industry in January 2019, and November 20,21. But only 12 banks accounted 48% of the total lending made to companies listed on the GCEL.
Turów Power Station in the southwest of Poland.
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10 out of these “dirty twelve” lenders are U.N. Members. Net Zero Banking Alliance — an industry-led initiative committed to aligning their portfolios with net-zero emissions by 2050.
Japan’s is the top lender providing coal-industry loans. Mizuho Financial, Mitsubishi UFJ Financial SMBC GroupThe U.K. followed closely with a respective BarclaysWall Street and the Wall Street Citigroup.
CNBC requested comments from companies named in the report. Citi and Mizuho Financial declined to comment on the analysis of NGOs.
“Vast amounts” of cash
It was underwriting that accounted for the majority of coal client banks’ capital mobilization. Banks issue bonds and shares to raise capital or investment for their clients and then sell them on to other investors, such as mutual funds or insurance funds.
Over the nearly two-year span from January 2019 through November 2017, 484 commercial banks funneled $1.2 billion to companies through underwriting. Just 12 banks account for 39%, or 19% of total underwriting in the period since 2019.
The JP Morgan Chase & Co. headquarters, The JP Morgan Chase Tower in Park Avenue, Midtown, Manhattan, New York.
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CNBC’s Urgewald’s Ganswindt reflected on the findings and said that banks should support the coal sector by looking at the bigger picture.
It doesn’t really matter if banks provide loans to the coal industry or underwriting services. Both of these actions result in the same thing: Huge amounts are paid to an industry, which is our climate’s most dangerous enemy,” she stated.
How about the investors?
Although banks are a key part of helping coal companies obtain capital by underwriting bond and share issuances, research from NGOs found that it’s investors who ultimately buy these securities.
Nearly 5,000 institutional investors were identified in this research, with combined assets of more than $1.2 trillion in coal. As of November 20,21, 46% of that sum was held by the top two dozen institutional investors. Blackrock Investments and Vanguard are the largest institutions investors in America, respectively.
“No one shouldn’t be misled by BlackRockThe s are VanguardThe membership of the Net Zero Asset Managers Initiative. Yann Louvel (Policy Analyst at Reclaim Finance), stated that the two institutions bear more responsibility for climate change than any other institutional investors worldwide.
He stated that it was “absolutely terrifying” to observe pension funds, asset mangers, and other institutional investors still bet on coal companies during the crisis.
BlackRock refused to comment on findings of NGOs.
CNBC spoke with Vanguard’s spokesperson, who said that Vanguard was committed to “encourage companies through effective stewardship to address material climate risk” by the energy transition.
They stated that Vanguard, as an asset manager, has the fiduciary obligation to various retail, intermediary and institution investors who have trusted us with their assets. We have the responsibility to protect client assets and invest them according to their investment strategy. This responsibility is very important to us.
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