Research shows how banks, investors finance coal industry

A bulldozer pushes coal onto a conveyor belt at Jiangyou power plant on January 28, 2022 in Jiangyou, Mianyang city, Sichuan province, China.

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LONDON — Banks and investors have funneled huge sums of money to support the coal industry in recent years, according to a new study, aimed at providing the world’s dirtiest fossil fuels at a time of humanity. species are facing a climate emergency.

Analysis released Tuesday by advocacy groups Urgewald and Reclaim Finance, along with more than two dozen other NGOs, shows that commercial banks have funneled $1.5 trillion to the coal industry from January 2019 to November last year.

Research shows that a very small number of financial institutions from a small number of countries play an overwhelming role in keeping the coal industry afloat.

Indeed, financial institutions from just six countries – the US, China, Japan, India, Canada and the UK – are considered responsible for more than 80% of coal investment and financing.

Katrin Ganswindt, head of financial research at Urgewald, said in the report: “These financial institutions are subject to criticism from all sorts of civil society organizations, financial regulators progressive customers and investors”. “Unless we stop financing coal, it will end us.”

Coal is the most carbon-intensive fossil fuel in terms of emissions and is therefore the most important target for replacement in the transition to renewable alternatives.

Fog blankets the Canary Wharf business district including global financial institutions Citigroup Inc., State Street Corp., Barclays Plc, HSBC Holdings Plc and the No. 1 commercial office block Canada Square, on Dog Island on Monday. November 5, 2020 in London, England.

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Who are the top lenders to coal customers?

The findings outline all corporate lending and underwriting to companies on Urgewald’s Global coal exit list but excluding green bonds and financing towards non-coal activities. GCEL refers to a list of 1,032 companies that account for 90% of the world’s coal-fired power generation and coal-fired capacity.

This is the first GCEL financial research update since Climate Conference COP26 was held in Glasgow, Scotland late last year. Campaigners argue that it is for this reason that analysis should be used as a benchmark against which to judge the truthfulness of promises made at COP26.

Banks love to argue that they want to help their coal customers convert, but the reality is that almost none of these companies are converting.

Katrin Ganswindt

Head of financial research at Urgewald

Large coal-dependent countries at UN talks first commit “reduce phase” coal-fired power generation and inefficient subsidies for fossil fuels. A last-minute intervention to revise the Glasgow Climate Compact’s terminology to “reduce” rather than “displace” has raised concerns among many that it would create a loophole to delay. postpone much-needed climate action.

“Banks love to argue that they want to help their coal customers convert, but the reality is that almost none of these companies convert. And they have little incentive to do so as long as the banks convert. bankers keep writing blank checks,” Ganswindt said.

Research by NGOs 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 loans. for companies on GCEL.

Turów Power Station in the southwest of Poland.

Dominika Zarzycka | NurPhoto | beautiful pictures

Of these so-called “dirty dozen” lenders, 10 are members of the United Nations Net Zero Banking Alliance – an industry-led initiative that has committed to align their portfolio to net zero emissions by 2050.

The top three lenders providing loans to the coal industry include Japan Mizuho Financial, Mitsubishi UFJ Financial and SMBC Corporationfollowed by the UK Barclays and Wall Street’s Citigroup.

CNBC requested comment from the companies identified in this report. Mizuho Financial and Citi both declined to respond to analysis by NGOs.

‘Large amount of cash’

Research shows that underwriting currently accounts for the largest share of capital that banks raise for their coal clients. Underwriting refers to the process by which banks raise investment capital or capital for companies by issuing bonds or shares on their behalf and selling them to investors such as pension funds, insurance insurance and mutual funds.

During the nearly two-year period from January 2019 to November last year, 484 commercial banks transferred $1.2 trillion to companies on GCEL through underwriting. Of these, only 12 were found to account for 39% of total underwriting as of 2019.

Headquarters of JP Morgan Chase & Co., JP Morgan Chase Tower at Park Avenue, Midtown, Manhattan, New York.

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

“Ultimately, it doesn’t matter whether banks support the coal industry by lending or underwriting. Both actions lead to the same result: Large amounts of cash are provided to the coal industry. Industry is our climate. The worst enemy,” she said.

What about investors?

While banks play a pivotal role in helping coal companies get capital through underwriting their stocks and bonds, the NGOs behind the research realize that ultimately the investors New investors are buyers of these securities.

The study identified nearly 5,000 institutional investors with a combined stake holding more than $1.2 trillion in the coal industry. The top two dozen companies accounted for 46% of this total as of November 2021. US investment giants Blackrock and Vanguard are considered the two largest institutional investors, respectively.

“No one should be fooled by Black stones‘sand VanguardMembers of the Net Zero Asset Manager Initiative. These two institutions have more responsibility for accelerating climate change than any other institutional investor worldwide,” Yann Louvel, policy analyst at Reclaim Finance, said in a statement.

He added it was “horrifying” to see pension funds, asset managers, mutual funds and other institutional investors still betting on coal companies amid the emergency. climate.

BlackRock declined to comment on the NGO’s findings.

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

“As an asset manager, Vanguard has fiduciary responsibility to the many retail, intermediaries and institutional investors who have entrusted assets to us,” they said. “Our mission is to invest our clients’ assets in line with their chosen investment strategy and act as custodians of those assets. We take this responsibility very seriously.”

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