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A new report finds that some of the world’s leading financial institutions pledged to go net-zero but then underwrote more than $1.5 trillion in debts for the coal industry over the last two years.
Twenty-eight non-profit organizations including Urgewald, Reclaim Finance, and 350.org Japan, say that between 2019 and 2021, banks from China, the United States, Japan, India, Britain, and Canada, funded $1.5 trillion to more than one thousand companies involved in mining, trading, transport, or use of coal, despite many of the institutions having made net-zero pledges.
The report comes after 40 countries pledged to end coal use following the COP26 climate talks in Glasgow in November. But absent from that list were China, India, and the United States—three of the biggest coal consumers.
“If banks from these 6 countries continue business as usual, we won’t be able to move out of coal in time to keep the 1.5°C limit within reach,” Katrin Ganswindt, head of financial research at the environmental nonprofit Urgewald, said in a statement accompanying the report. The 1.5°C target was established in 2015 during the Paris Agreement. It commits countries to limit the global average temperature rise to below 2°C above pre-industrial levels in order to reduce the impact of climate change. According to the report, reducing coal use is key to that goal.
“It’s long been known that the coal industry is the number one driver of our planet’s rising temperature. But who is providing the loans, the underwriting services, and the investments that allow these companies to keep on operating? Our research answers this question,” Ganswind said.
Funding big coal
“Our research displays all corporate lending and underwriting for companies on the GCEL [Global Coal Exit List], but excludes green bonds and financing that is expressly directed towards non-coal activities,” explains Ganswindt.
“Banks like to argue that they want to help their coal clients transition, but the reality is that almost none of these companies are transitioning,” Ganswind said. “And they have little incentive to do so as long as bankers continue writing them blank checks.”
China’s banks dominated the list, according to the findings—all of the top ten underwriters were Chinese. The Industrial and Commerical Bank of China topped the list with more than $57 billion in underwriting. Direct loans totaled more than $373 billion, with the two biggest lenders coming from Japan: Mizuho Financial and Mitsubishi UFJ Financial, both of whom are members of the Net Zero Banking Alliance.
The groups behind the report say institutional investments in coal firms during the period neared $500 billion; that was led by BlackRock, the world’s largest assets manager. Last month, BlackRock CEO Larry Fink said divesting wasn’t the way to get the world to net-zero. “Foresighted companies across a wide range of carbon intensive sectors are transforming their businesses, and their actions are a critical part of decarbonization,” he wrote in a letter to executives.
“All in all, we identified institutional investments of over US$ 1.2 trillion in the coal industry,” says Yann Louvel, policy analyst at Reclaim Finance. “It’s absolutely frightening to see that pension funds, asset managers, mutual funds, and other institutional investors are still betting on coal companies in the midst of an existential climate crisis,” he adds.
A call for a coal-free future
Last October, the World Bank called for drastic changes to the coal industry. There are currently 8,500 coal power plants operating around the world, generating one-third of all electricity. They’re the single biggest source of emissions, producing at least 20 percent of all CO2, but some estimates put coal’s emissions at more than 40 percent.
“And while cutting emissions has become a key global priority, more than 300 new coal power plants are slated to come online in the coming five years,” the World Bank warns. “Those that do will add materially to emissions – unless action is taken.”
It called for a halt on approving any new coal power plants unless outfitted with carbon capture technology.
“But to make real progress on the goal of reducing greenhouse gas emissions, this alone will not be enough,” it said, urging nations to address emissions from the existing plants.
“This task requires political will and significant financial resources that go well beyond closing coal plants, retrofitting them with carbon capture technologies or using lower-emission fuels,” the World Bank said.
“At the end of the day, it doesn’t matter whether banks are supporting the coal industry by providing loans or by providing underwriting services,” says Ganswindt. “Both actions lead to the same result: Vast amounts of cash are provided to an industry that is our climate’s worst enemy.”
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