2015: The year banking’s behemoths went green

As coal prices continue to fall, it appears financing for projects involving the natural resource are also falling out of favour with banking’s behemoths.

This year alone the likes of Bank of America, BNP Paribas, Credit Agricole, Citigroup, ING, Société Générale, Morgan Stanley and Wells Fargo have each amended their coal financing policies. According to The Coal Test report, this is largely in recognition of the risks that increased carbon emissions and thus climate change pose to the global economy.

The latest data from the International Energy Agency, shows 46% of harmful global carbon dioxide emissions in 2013 could be attributed to coal usage – even though it comprised only 29% of total primary energy supply in the world.

In a recent statement announcing its intention to reduce the proportion of its energy financing to coal mining and coal-fired power generation, Morgan Stanley said: “As a financial institution, our greatest impact lies in how we can leverage the capital markets to scale low-carbon sources of energy and other sustainability strategies”.

ING CEO Ralph Hamers echoed this sentiment. “Climate change is an unparalleled challenge for our world, and banks have a real responsibility to play a role in addressing it,” he said ahead of the firm’s participation in COP21, the United Nations’ climate talks currently taking place in Paris. At the same time, ING said it would end its financing of new coal-fired power plants and thermal coal mines across the world with immediate effect and deny finance to “new clients whose business is over 50% reliant on operating coal-fired power plants or thermal coal mines”.

Insurance firms Allianz and AXA are also reducing their exposure to coal, with the former committing to divest from companies with more than 30% exposure to coal and the latter announcing that it would sell some $550m of coal assets.

The Coal Test report shows lawmakers are also getting in on the act as a new California law requires the state’s largest pension funds to divest their coal mining holdings. Earlier this year, Norway’s parliament supported the move to sell off coal assets from its $945m sovereign wealth fund.

At home, South Africa’s is still highly dependent on burning coal for energy but the government, through its Intended Nationally Determined Contribution (INDC), is making a series of long-term commitments ranging from 2021 to 2030 at COP21. “Despite being responsible for about 1% to 1.5% of annual global emissions, South Africa is already investing about 6% of what would be the upper end of its adaptation needs per annum for the period 2021 to 2030, which is a disproportionate burden arising out of a global commons problem,” the INDC document says. According to the document, South has already invested in 5234 Megawatts (MW) of renewable energy and is considering adding a further 6300MW. It also notes that a “just transition” to realise the opportunities of a low carbon economy “requires time and careful development”.

In response to questions as to whether it would take a cue from the large international banks and amend coal financing policies, Rand Merchant Bank (RMB) said a long term portfolio shift to greener technologies is high on its agenda. “Whilst supporting the South African economy, RMB uses this transition time to enable the development of renewable energy facilities which will create an energy mix for the future, decreasing dependency on coal and providing greener technologies,” RMB said. Highlighting that it has “led the debt financing” for projects under the Department of Energy’s Renewable Energy Independent Power Producer Programme with a total project value in excess of R55bn, RMB also said that its African operations provide it with opportunities to “leapfrog older technologies like coal and swiftly move to newer, cleaner and greener technologies”.

New data from Climate Action Tracker, presented at COP21, shows that plans to build 2440 coal-fired power stations across the world exist. According Climate Action Tracker, should those plans go-ahead COP21’s aim to limit global warming to 2˚C until 2100 will be setback. “Even with no new construction, emissions from coal-fired power generation in 2030 would still be 150% higher than what is consistent with scenarios limiting warming to below 2°C above preindustrial levels (middle of the range). If the planned new coal capacity – estimated by the Global Coal Plant Tracker – were to be built, it would exceed the required levels by 400%,” it said in a statement.

At the same time, The Coal Test, a collaborative report by Rainforest Action Network, BankTrack, Les Amis de la Terre and urgewald accuses the banks of “greenwashing”. According to the report, the banks’ financing for coal between COP15 in Copenhagen in 2009 and COP21 this year shows “their failure to back talk with action” (see chart below).

Catalina von Hildebrand BankTrack’s coordinator of the Paris Pledge, a campaign urging banks to end financing for coal said: “In the run-up to Paris we’ve heard many banks insisting that they are leaders on climate as if the $257bn they’ve poured into dirty coal in the years between the Copenhagen and Paris COPs is an irrelevant accounting error. It’s time they start making amends by dumping coal and rapidly boosting their finance for clean energy”.

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