Asian banks are failing on climate by channeling billions into coal
Many of the world’s leading financial institutions have pledged in recent years to slash their support for the coal and oil industries. But a new report has found that hundreds of billions of dollars are still being channeled into fossil fuels, and Asia’s banks are doing much of that business.
Globally, 380 commercial banks lent the coal industry $315
billion over the past two years, according to the report, which was compiled by
more than two dozen non-governmental organizations, including Urgewald, Reclaim
Finance, Rainforest Action Network and 350.org Japan. The groups say their
research is the first to analyze the financiers and investors supporting the
entire coal industry.
The top three lenders to the coal industry were all
Japanese: Mizuho, Sumitomo Mitsui Banking Corporation, and Mitsubishi UFJ
Financial Group. Collectively, Japanese banks provided $75 billion in loans
between October 2018 and October 2020, according to the report.
Mitsubishi told CNN Business that as of May 2019, it said it
would no longer provide financing for new coal-fired power generation projects,
with some exceptions. It also said it would not consider financing for new coal
projects going forward “unless it is confirmed that the project will contribute
to innovative technologies or transitions towards achieving the Paris Agreement
goals.”
Mizuho said that the NGO report “does not reflect the
reality,” adding that the report uses only publicly available data. The bank
said it takes issue with the way the report has counted the loans and how it
selects “objective companies.”
“Mizuho sees sustainability as an integral part of our
corporate strategy,” the company said. It added that it is working to
“proactively support initiative for transitioning to a low-carbon society,” and
has set financing goals to address climate change.
Sumitomo Mitsui said Friday that as of last year, it pledged
to no longer offer services supporting “newly planned coal-fired power plants.”
It added that it intends to reduce the balance of coal plant-related loans to
zero by 2040.
While Japan leads the way in lending, the United States
ranks second, providing loans worth $67.7 billion, or 21.5% of the total.
American firms are also more heavily invested in coal than
others, according to the report. Of the more than $1 trillion that the report
found has been invested in companies working in the industry worldwide as of
January, more than $600 billion of that comes from US investors.
Meanwhile, the world’s top 10 underwriters — banks that
raise investment capital for companies by issuing bonds or shares on their
behalf and selling them to investors — are all Chinese financial institutions,
the report found. Chinese banks channeled $467 billion to the coal industry
over the past two years, more than half of the total examined by the report.
The report analyzed 934 companies on the Global Coal Exit
List (GCEL), a database of companies operating along the thermal coal value
chain compiled by Urgewald. It also found that financing for coal has actually
increased in the years since the Paris Agreement, the landmark climate accord, went
into effect. The total ticked up 11% between 2016 and 2019.
Since the Paris Agreement was signed, the world’s installed
coal-fired power generation capacity has increased by 137 GW, an amount equal
to the operating coal plants of Germany, Russia and Japan combined, according
to the Global Coal Exit List. And over 500 GW of new coal-fired capacity are in
the pipeline.
One of the main reasons for the increased investment is that
globally coal remains the main energy source for electricity generation.
“Until investments are made in renewable energy, the fact is
that people still need electricity. This is especially true in Asia as compared
to the US or Europe where coal use is decreasing,” said Eri Watanabe, 350 Japan
Finance Campaigner. “This is the main reason banks continue to invest, despite
the fact that returns on investment are dipping.”
The United Nations says it is necessary to phase out fossil
fuels — like coal — to stop the very worst impacts of man-made climate change.
The Paris Agreement is a pact signed by almost all the world’s countries that
seeks to limit global warming to well below 2°C and pursue efforts to limit it
to 1.5°C. A recent report found that from now until 2030, the global production
of coal would have to decline annually by 11% to reach this target.
In recent years, there has been some momentum among big
banks to distance themselves from coal and oil companies whose long-term
fortunes are threatened by the climate crisis. In 2019, Goldman Sachs became
the first big US bank to pledge not to write loans for Arctic drilling. Last
fall, JPMorgan Chase said it would refuse lending, capital market and other
services to companies that make most of their revenue from coal extraction.
But environmental groups say fossil fuel policies adopted by
banks don’t go far enough and financial institutions should support their
countries’ climate goals by divesting of coal investments at home and abroad.
“These numbers provide a sobering reality check on bank’s
climate commitments,” said Yann Louvel, policy analyst for Reclaim Finance.
The NGO, which operates an online “Coal Policy Tool” that
tracks and ranks financial institutions’ coal policies, said that 88 commercial
banks have adopted a coal policy, but only four have “robust” coal exclusion
policies.
“The new financial data confirms the findings of our Coal
Policy Tool: The vast majority of banks’ coal policies have so many loopholes
that their impact is almost meaningless,” said Louvel.
China the biggest coal underwriter, US the biggest investor
The world’s leading underwriters for coal are all Chinese,
according to the report, which singled out the Industrial and Commercial Bank
of China (ICBC), the China International Trust and Investment Corporation, and
the Shanghai Pudong Development Bank as the top banks raising money for the
industry.
ICBC and CITIC did not respond to requests for comment from
CNN Business, while the Shanghai Pudong Development Bank could not be reached.
Chinese banks channeled $467 billion to the coal industry over
the past two years through underwriting, followed by banks in the United States
with $104 billion, then Japan, India and the United Kingdom.
In total, 427 commercial banks underwrote $808 billion to
companies on the GCEL over the past two years.
350 Asia Finance Campaigner Chuck Baclagon said continued
investments in coal projects from the world’s biggest banks will become even
riskier as the world recovers from Covid-19.
“ICBC can become leaders by spearheading the transition to a
clean, safe and just recovery as renewable energy investments generate returns
while boosting employment opportunities. By doing so they can also contribute
to China’s climate goals,” Baclagon said.
Meanwhile, US investors are making by far the biggest
institutional investments in the global coal industry, with shares and bonds
worth $602 billion — 52% of the market share.
Vanguard and BlackRock were the two largest institutional
investors, holding more than $80 billion each, according to the report. They
did not immediately respond to a request for comment from CNN Business.
Japanese investors come next, with holdings in the coal
industry of $81 billion. The report found that Japan’s Government Pension
Investment Fund alone holds bonds and shares in value of $29 billion in
companies listed on the GCEL. The third largest group of investors are from the
United Kingdom.
The United States, United Kingdom and Japan have all
committed to achieve net zero carbon emissions by 2050, and China by 2060, but
environmental groups say continued financing of fossil fuels will put those
goals out of reach.
For example, Japan’s carbon neutral goals don’t highlight
any concrete policy shifts for fossil fuel investment, according to 350.org.
“If these gaps are not addressed, what would happen is that
nearer to 2050 they are going to realize that they can’t meet those goals, and
by that time we might have missed our chance to limit warming,” said Watanabe.
What is needed from the banking industry is a “speedy exit
from coal finance” as a “question of survival,” she added.
“What we need are comprehensive, immediate coal exit
policies,” said Louvel. “Insurers such as AXA, banks like Crédit Mutuel,
UniCredit and Desjardins or asset managers like Ostrum have already shown what
must be done by excluding most of the companies on the Global Coal Exit List
from their portfolios. Now is the time for the finance industry to act.”
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