End Coal Finance
Will O'Sullivan – BankTrack
Will O'Sullivan, Coal finance campaigner
Will O'Sullivan – BankTrack
Will O'Sullivan, Coal finance campaigner
Coal must end.
The ever-growing risk to life on the Earth posed by climate change has in large part been due to the burning of coal. And, at this crucial moment for climate action, the global economy’s use of coal continues to be a deciding factor in our chances of mitigating the worst effects of climate change. Every IPCC emissions reduction scenario (p.299) that avoids the most dire and irreversible effects of climate change involves a rapid phase-out of coal. The UN Secretary General called in 2020 for the immediate cessation of all new coal-fired power plants. The decade to 2030 needs to see steep reductions (45%, compared to 2020 levels) in fossil fuels to preserve the 1.5°C target of the Paris Agreement. The relative burden of that reduction falls particularly heavily on coal, compared to oil and gas, due to its very high emissions. Yet, despite the urgency of phasing out coal, it remains the largest energy-related source of CO2 emissions in the world, with emissions from coal growing in 2022 to reach an all-time high of 15.5 gigatonnes.
Investment in global coal supply continues to grow and is expected to increase by another 10% in 2022. While most of the world’s largest banks now exclude finance for new coal, and a growing number have measures in place to phase out coal finance, coal’s continued expansion is still being made possible by some commercial banks and their backers in development finance institutions. In 2022, research showed that commercial banks had channelled more than $1.5 trillion into the coal supply chain between January 2019 and November 2021.
We are campaigning together with our international partners IDI, Recourse, and regional partners including Trend Asia, PMCJ, WALHI, and the NGO Forum on ADB, for an end to the remaining finance for coal projects. Our approach is guided by two key elements: the global concentration of coal expansion in Asia, and the role of development finance institutions (DFIs) banks as important indirect financiers of coal, often through commercial bank intermediaries.
On the first point, collectively, a total of 27 countries in Asia account for about 76% of current global coal generation capacity. Tackling the remaining fossil fuel expansion in Asia is urgent: it has seen the largest growth in greenhouse gas emissions in the world over the last two decades, with three Asian countries in the top ten of global emissions. Asian commercial banks play a huge role in propping up the region’s coal industry, and still have a substantial appetite for financing coal. According to the Global Coal Exit List, 47 Indian banks have provided $110 billion in coal finance between October 2018 and October 2020; 10 Philippine banks over $2bn and 11 Indonesian banks nearly $10bn.
On the second point, 2023 will be a crucial year to get financial institutions, both public and private, onto a genuinely low carbon pathway, leaving no room for new coal finance and urging a shift to financing clean technologies. The World Bank Group has committed to align all of its new operations to the Paris climate goals by 1st July 2023, and its private sector arm – the International Finance Corporation (IFC) – amended its Green Equity Approach in April 2023 to prevent its equity clients (e.g. commercial banks)from investing in new coal projects. Similarly, the Asian Infrastructure Investment Bank and the Asian Development Bank have announced that they will align their operations with the goals of the Paris Agreement with similar deadlines to the World Bank. Meanwhile, the European Bank for Reconstruction and Development will start requiring all its indirect finance transactions to be Paris-aligned starting January 1, 2023.
Yet, while almost every major DFI has committed to end coal finance, several loopholes still exist that allow coal investments to continue, for example through commercial banks acting as financial intermediaries. These loopholes matter, especially in southeast Asia, where DFI financing for coal via intermediaries is alive and well in Indonesia, the Philippines, India and Vietnam. To take one example, Postal Savings Bank of China, in which the IFC holds a $300 million equity stake, underwrote $10.3 billion in shares and bonds of coal companies and provided $166 million in corporate loans for the coal industry from 2019 to 2021 alone. Hana Bank in Indonesia and Rizal Commercial Bank (RCBC) in the Philippines are two more stark examples of banks that are IFC-funded and coal-funding.
What BankTrack does
expose the key commercial bank financiers of the coal industry in Asia and their links with public sector development banks, together with partners .
identify and evaluate banks' policies as they relate to coal, using the criteria of Reclaim Finance's Coal Policy Tool (see below) to set a benchmark and inform the campaign's demands.
profile Dodgy Deals, to highlight the human and environmental cost of these coal projects and companies, in partnership with Asian allies and build their capabilities to stop them and to work with climate and finance coalitions to amplify our impact.
link case examples to the need for systemic change in our engagements with banks as well as in our communications, stressing the need for a shift from coal to clean energy, and not to other fossil fuels.
These tactics bring pressure to bear on key decision-makers at public and private sector banks, their shareholders and regulators, to change their policies and practices.
What banks must do
Banks must phase out finance for coal across all their financing activities, including corporate financing in the form of loans and underwriting, which now accounts for the majority of bank financing to the coal industry. In order to achieve this, banks must:
Immediately end all financing for coal expansion projects and for all coal companies with expansion plans (almost half of all coal companies), along the whole thermal coal value chain;
Phase out all ongoing financing for coal projects and companies, on a timeline aligned with limiting global warming to 1.5°C, starting with an immediate end to finance for coal mining and coal power, as well as projects and companies active in tar sands oil, Arctic oil and gas, offshore oil and gas, fracked oil and gas, and LNG;
Require all their existing clients to publish phase-out plans for their coal activities on a 1.5°C-aligned timeline;
Commit to zero out the climate impact of their entire finance portfolio before 2050, and to halve this impact by 2030 at the latest, without relying on discredited offset schemes
Publicly and comprehensively report on all the previous steps.
Coal Policy Tool
Reclaim Finance tracks the oil and gas policies of financial institutions, including banks, in the Coal Policy Tool. The below shows the assessments for commercial banks. The table can be filtered by country and for NZBA membership (see here). For more information about the tool and methodology, visit Reclaim Finance's webpage on the tool.
Our policy assessments are always a work in progress and we very much welcome any feedback, especially from banks included in them. You can of course also contact us for more information on specific scores and the latest policy changes. Please get in touch at firstname.lastname@example.org.