May 25, 2022

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Research shows how banks and investors are financing the coal industry

Research shows how banks and investors are financing the coal industry

A bulldozer pushes coal into a conveyor belt at Jiangyou Power Plant on January 28, 2022 in Jiangyou, Mianyang City, Sichuan Province, China.

Liu Chongjun | China News Service | Getty Images

LONDON – Banks and investors have funneled huge sums of money to prop up the coal industry in recent years, according to new research, to subsidize the world’s dirtiest fossil fuels at a time when humanity faces a climate emergency.

Analysis published Tuesday by campaign groups Urgewald and Reclaim Finance, along with more than two dozen other NGOs, found that commercial banks channeled $1.5 trillion into the coal industry between January 2019 and November last year.

The research shows how a small number of financial institutions from a handful of countries play a large role in keeping the coal industry alive.

In fact, financial institutions from just six countries – the US, China, Japan, India, Canada and the UK – were seen as responsible for more than 80% of coal financing and investments.

“These financial institutions must come under fire from all sides: civil society organizations, financial regulators, clients and progressive investors,” said Catherine Janswindt, head of financial research at Orgewald, in the report. “Unless we end the coal financing, it will end us.”

Coal is the most carbon-intensive fossil fuel, and therefore the most important substitution target in switching to renewable alternatives.

Fog covers the Canary Wharf business district including global financial institutions Citigroup Inc. and State Street Corp. and Barclays Plc, HSBC Holdings Plc and Commercial Office No. 1 Canada Square, at the Isle of Dogs on November 5, 2020 in London, England.

Dan Kitwood | Getty Images News | Getty Images

Who are the major lenders to coal customers?

Results identify all corporate lending and corporate underwriting at Urgewald’s global coal exit list But exclude green bonds and financing directed towards non-coal activities. GCEL refers to a list of 1032 companies that account for 90% of the world’s thermal coal production and coal burning capacity.

It’s the first GCEL funding research update in a year COP26 . Climate Conference Held in Glasgow, Scotland late last year. Defenders of the campaign say that for this reason the analysis should be seen as a benchmark for assessing the integrity of promises made at COP26.

Banks like to argue that they want to help their coal customers transition, but the reality is that none of these companies are in transition.

Catherine Janswindt

Head of Financial Research at Urgewald

Key coal-reliant countries in UN talks pledged for the first time to “gradual reduction” Coal-fired power generation and inefficient fossil fuel subsidies. A last-minute intervention to amend the terms of the Glasgow Climate Charter to “phase out” rather than “phase out” has raised concerns among many that it would create a loophole to delay much-needed climate action.

“Banks like to argue that they want to help their coal customers transition, but the reality is that almost none of these companies are in transition. And they have little incentive to do so as long as bankers continue to write blank checks,” Ganswindt said.

The NGO research shows that while 376 commercial banks provided $363 billion in loans to the coal industry between January 2019 and November 2021, only 12 banks accounted for 48% of total corporate lending in GCEL.

Turów power station in southwestern Poland.

Dominica Zarzyka | Norfoto | Getty Images

Among these alleged “dirty dozen” lenders, 10 are members of the United Nations Net Zero Banking Alliance An industry-led initiative committed to aligning its investment portfolios with net zero emissions by 2050.

The three largest lenders providing loans to the coal industry are Japanese banks Mizuho FinanceAnd Mitsubishi UFJ Financial And SMBC Grouprespectively, followed by the United Kingdom Barclays Wall Street City Group.

A Barclays spokesperson said that in January 2019 the bank committed “not to provide any project financing for the construction or physical expansion of coal-fired power plants or the development of thermal coal mines anywhere in the world.”

Barclays has since said it will not provide public funding to companies specifically for new or expanded coal mining or the development of coal-fired power plants, and says it has tightened restrictions on funding for thermal coal mining and energy customers.

Meanwhile, Mitsubishi UFJ Financial has announced goals to achieve net zero emissions in its operations by 2030 and its financing portfolio by 2050.

“MUFG takes its mission to contribute to the sustainable growth of customers and society very seriously, and is therefore committed to operating in a socially responsible manner and in accordance with the long-term development requirements of the markets in which it operates,” the spokesperson said.

Mizuho Financial and Citi declined to respond to the NGO analysis when contacted by CNBC.

huge sums

The study found that underwriting now accounts for the lion’s share of the capital banks raise for their coal customers. Underwriting refers to the process by which banks raise investment or capital for companies by issuing bonds or shares on their behalf and sell them to investors such as pension funds, insurance funds, and mutual funds.

In the roughly two-year period from January 2019 through November of last year, 484 commercial banks channeled $1.2 trillion to companies in GCEL through the underwriting. Among these banks, only 12 banks were found, representing 39% of the total underwriting since 2019.

The headquarters of JP Morgan Chase & Co. , The JP Morgan Chase Tower in Park Avenue, Midtown, Manhattan, New York.

Tim Clayton – Corbis | Corbis Sport | Getty Images

the Industrial Commercial Bank of ChinaChina International Credit and Investment Corporation and Shanghai Pudong Development Bank They are identified as the top three insurance companies in the coal industry. In fact, the only non-Chinese bank was among the coal industry’s 12 largest IPOs c. B. Morgan ChaseThe largest US bank by assets.

JP Morgan’s list of coal customers in 2021 “reads like ‘who is’ one of the most carbon-heavy companies on the planet,” said Jason Obenya Desterhoft, senior climate and energy campaigner for the Rainforest Action Network.

he added: “Despite the new coal policy in 2020still serves major carbon polluters such as China Huaneng, American Electric Company And promise me. “

A JPMorgan Chase spokesperson said: “Being the first US bank to set Paris-compliant 2030 carbon reduction goals, including for the electric power sector, and creating a $2.5 trillion sustainability effort are clear examples of our continued commitment to supporting the transition to a low-carbon economy.”

Reflecting on the research findings, Urgewald’s Ganswindt told CNBC that it’s important to see the big picture when it comes to how banks are providing support to the coal industry.

“At the end of the day, it does not matter whether the banks support the coal industry by providing loans or by providing underwriting services. Both actions lead to the same result: huge amounts of cash are provided to the coal industry’s worst enemy,” she said.

What about investors?

While banks play a pivotal role in helping coal companies obtain capital by subscribing to their stakes and issuing bonds, the NGOs behind the research have realized that investors are ultimately the buyers of these securities.

The research identifies nearly 5,000 institutional investors who own more than $1.2 trillion in the coal industry. Dozens of the top ten companies account for 46% of this amount as of November 2021. American investment giants Blackrock and Vanguard were found to be the largest institutional investors, respectively.

“No one should be deceived Black stone‘sand forefrontMembership in Net Zero Asset Managers Initiative. These two institutions have more responsibility for accelerating climate change than any other institutional investor worldwide, said Jan Lovell, policy analyst at Reclaim Finance.

He added that it was “extremely frightening” to see pension funds, asset managers, mutual funds and other institutional investors still betting on coal companies in the midst of the climate emergency.

BlackRock declined to comment on the NGO findings.

A Vanguard spokesperson told CNBC that the company is “committed to encouraging companies, through effective oversight, to address physical climate risks” through the energy transition.

“As an asset manager, Vanguard has a fiduciary responsibility to the wide range of individual investors, brokers and institutions who have entrusted their assets to us,” they said. “Our mandate is to invest clients’ assets in accordance with their chosen investment strategies, and to act as responsible for these assets. We take this responsibility very seriously.”

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