Banks have pledged to go green. Yet they can’t seem to ditch coal.
Coal, the highest carbon emitting and dirtiest energy source, is the single biggest contributor to human-created climate change. Global power generation from coal grew 9% last year to an all-time high.
Over the last three years commercial banks have funneled $1.5 trillion into the industry, according to a recent report by green campaign groups Urgewald and Reclaim Finance along with more than two dozen other NGOs.
The biggest lenders to coal, the study found, include Japan’s Mizuho Financial Group, Barclays, Citi, and JPMorgan Chase. All four banks are members of the UN Net Zero Banking Alliance and have committed to aligning their portfolios with net zero carbon emissions by 2050.
Institutional investors hold a combined $1.2 trillion in coal industry assets as of November 2021, numbers that appear to be on par with holdings in 2020.
At the top of the list was BlackRock, which held 9% of global coal stock holdings. About $110 billion of its equity is in coal producing companies, and $34 billion is invested in companies building new coal plants, the report found.
BlackRock’s holdings represent a small percentage of its $10 trillion in total assets under management, but the coal developers in BlackRock’s portfolio have plans for new projects equivalent to the power capacity of all the coal in Russia, Japan, Indonesia, Poland, and Germany combined.
BlackRock declined to comment.
There’s a “massive disconnect” between the green rhetoric of the largest financial institutions, their climate commitments and net zero pledges, and their actual financing practices when it comes to new fossil fuel development, said Ben Cushing, manager of the Sierra Club’s Fossil-Free Finance campaign.
Citi, JPMorgan Chase, Bank of America, and Wells Fargo all increased their financing of the 30 top coal companies between 2016 and 2021, a report released last week by the Rainforest Action Network and six other NGOs said. Top banks lent $742 billion to the fossil fuel industry in 2021, down just a smidge from $750 billion in 2020, it said.
JPMorgan Chase, Citi, Wells Fargo, and Bank of America are the top four fossil fuel funders in the world, according to the report, with Morgan Stanley and Goldman Sachs rounding out the top 14. Together, these six US banks have provided 31% of all fossil fuel funding since the 2015 Paris Agreement and 29% of all financing identified in 2021. All six banks are part of the Net Zero Alliance.
Some investors have had enough: All six of the largest US banks will face investor resolutions around funding of fossil fuel companies during their annual shareholder meetings this spring.
Bank policies around coal funding typically have loopholes that allow financing to continue through multiple channels. Banks can restrict financing for specific projects involving coal but won’t rule out general purpose loans or deals for a whole company.
Some banks won’t finance a company that derives more than 25% of its revenue or output from coal, but some of the largest coal developers in the world are massive, diversified organizations. Glencore, one of the world’s largest producers and exporters of coal, made just 24% of its industrial revenue from the fossil fuel in 2021. The rest came from copper, zinc, and other metal mining and marketing.
Many banks produce interim targets based on carbon intensity metrics, measured as total carbon emissions divided by total units of production or economic activity. “That’s a cunning trick and doesn’t mean that their total emissions are going down,” said Cushing. If you fill up your car with a lower emitting form of gas, but drive twice as far, the intensity of your emissions will be lower but your net emissions will remain the same.
Companies often say they need time to evaluate clients’ portfolios and determine how to continue to work with them
“It’s not rocket science,” said Ted Nace, founder and executive director of Global Energy Monitor, an NGO that catalogs fossil fuel and renewable energy projects worldwide. The energy sector is capable of taking quick and decisive action when pressured, even when it’s costly.
Exhibit A: Western oil and gas companies cut their ties with Russia almost immediately after the invasion of Ukraine, proving that even the biggest firms can quickly dump toxic assets.
Give us time
A spokesperson from the United Nations’ Net Zero Banking Alliance (NZBA) said that comprehensive transitional plans “will require years to plan and execute.” Many members of the alliance are only months into their net-zero pledges in 2021, the spokesperson said.
An immediate divestment from existing fossil fuel positions could lead to “extreme market shocks” that could “profoundly impact the world’s most vulnerable people,” the spokesperson added.
The other financial institutions CNN Business reached out to asked to speak on background, didn’t respond, or simply sent links to their publicly available coal and net zero policies.
BlackRock has divested from all companies that derive a quarter or more of profits from thermal coal in its $2.6 trillion in actively managed strategies. The majority of the company’s $10 trillion under management is held in passive funds to which the coal policy does not apply.
But time is running out.
This week the United Nations’ Intergovernmental Panel on Climate Change issued a stark warning: the world must cut its coal use by 95% within the next 28 years to avoid climate chaos.
If carbon emissions don’t fall significantly over the next few years and the planet continues to warm at current rates, expect to see “major cities under water, unprecedented heatwaves, terrifying storms, widespread water shortages, the extinction of a million species of plants and animals,” said United Nations Secretary General António Guterres.
It’s not all about money, just mostly
A recent report from London-based energy and climate think-tank InfluenceMap, found that the world’s 30 largest financial institutions all belong to industry associations “that have consistently lobbied to weaken key sustainable finance policies” in the European Union, Britain and the United States.
Coal retains political power in the United States. The US is the world’s third largest coal consumer. When 40 countries signed a pledge to phase out coal in the coming decades at international climate talks in Scotland in 2021, the US did not sign.
Global power generation from coal grew 9% last year to an all-time high and US-based Peabody Energy, the world’s largest private sector producer of coal, had its most profitable Q1 ever this year.
Russia’s invasion of Ukraine and a potential ban on Russian coal in the European Union has also made coal an extremely profitable commodity. This week, US coal prices topped $100 per ton for the first time in 13 years in response to supply shortage fears. The cost per ton was about $54 at this time in 2020, when Russian coal accounted for about 18% of all global exports.
“This could be a decisive moment for the world,” said Natasha Ion, climate campaigner at BankTrack, an NGO focused on tracking banks and the activities they finance. “We are already seeing markets shift in response to Russia. I urge banks not to increase funding for fossil fuels as a result.”