Banks And Investors Are Still Pouring Billions Into Coal Companies

The Four Percent


Coal is the number-one single source for increasing global temperatures, with coal-fired electricity generation accounting for 30% of the world’s carbon dioxide emissions. And yet, scores of banks and institutional investors continue to pump money into supporting and expanding this fossil fuel industry, new research finds. 

As of January 2021, institutional investors such as pension funds, asset managers and insurance companies around the world held investments worth more than $1 trillion in coal, with U.S. investors collectively holding 58% of the institutional investment in the global coal industry. 

Commercial banks, meanwhile, have increased their funding of coal companies since the 2016 signing of the Paris climate agreement, in which countries pledged to limit global warming to well below 2 degrees Celsius. 

The new research, released Thursday by Urgewald, Reclaim Finance and Rainforest Action Network along with 26 other nonprofits, examined the money flowing to 934 coal companies using information from financial databases. “This is the first time anyone has attempted to analyze commercial banks’ and institutional investors’ exposure to the entire coal industry,” said Katrin Ganswindt, the head of financial research at Urgewald.

The investment firm Vanguard is the largest institutional investor in coal, according to the research, with holdings of almost $86 billion. It’s followed by BlackRock, the world’s largest asset manager, which holds more than $84 billion in coal investments, according to the research. These two U.S.-based investors together are responsible for 17% of the total institutional investment in the world’s coal industry. 

These findings comes after a number of financial institutions in recent years announced new policies restricting their coal industry lending.

BlackRock, for example, has divested from companies making more than 25% of their revenue from thermal coal for its actively-managed funds. A spokesperson for BlackRock said that “our conviction is that climate risk is investment risk,” but that the firm cannot divest when it comes to index funds, which track lists of companies. 

For these funds, the spokesperson said, “We ask all companies to disclose their plan for alignment with a global net-zero economy by 2050. … Where we do not see sufficient progress, we take voting action.”

A spokesperson for Vanguard said that most of the firm’s coal holdings were in index funds and that the firm engages with these companies: “We make clear our expectations that they pursue globally accepted climate risk mitigation targets such as those in the Paris Agreement and report on their short- and long-term progress toward meeting those goals. Where companies are not moving in line with market regulation or taking the necessary action to mitigate climate risk, we will take action.”

The researchers also examined lending and underwriting services by commercial banks. “What surprised me,” said Ganswindt, “is that, for banks, we cannot see a clear downward trend for overall [coal] financing.”

The total amount that commercial banks are funneling to coal companies through lending and underwriting services increased by 11% between 2016 and 2019, according to the research.

Japanese banks are the top coal lenders, providing $76 billion in coal financing between 2018 and 2020. “The coal policies adopted by Japanese banks are among the weakest in the world,” said Eri Watanabe from 350.org Japan, one of the other nonprofits behind the research. These policies are full of caveats, she said, and don’t rule out financing for companies still building new coal plants in countries such as Japan, Vietnam and the Philippines.

Coal from an underground mine in Muhlenberg County, Kentucky, pours off the end of a conveyor onto a pile used to load trucks



Coal from an underground mine in Muhlenberg County, Kentucky, pours off the end of a conveyor onto a pile used to load trucks for delivery in December 2018.

U.S. banks were the second biggest lenders, providing $68 billion to coal companies between 2018 and 2020. Citigroup was the leading U.S. funder with $13.5 billion in loans to coal companies over the last two years.

In April 2020, Citigroup committed to stop providing financial services for thermal coal mining by 2030. But the policy is limited, said Yann Louvel of Reclaim Finance, a nonprofit that tracks financial firms’ coal policies. “If you read the small print,” Louvel said, “the phase-out only applies to companies that generate at least 25% of their revenues from thermal coal mining, thus letting large diversified coal miners slip out of the net.”

Citigroup declined to comment. 

U.S. commercial banks are also among the biggest underwriters of coal projects in the world, according to the report, second only to Chinese banks. U.S. banks supplied $104 billion in underwriting services to the coal industry over the past two years.

“These numbers provide a sobering reality check on banks’ climate commitments,” said Louvel. Reclaim Finance has analyzed 237 financial institutions globally with coal policies and said that only 18 have strong policies that significantly restrict coal funding.

The United Nations’ Intergovernmental Panel on Climate Change has said that coal must be phased out by 2050 if the world is to have a chance of tackling the climate crisis. 

To achieve this, “the bulk of coal financing and investment must be ended before 2030,” said Paddy McCully, climate and energy program director at Rainforest Action Network. “This is the decade that counts.” 

The nonprofits behind the research are calling for urgent action through robust and immediate coal exclusion policies and government intervention. “Now is the time for the finance industry to act,” said Louvel. “A speedy exit from coal finance and investment is not only doable and desirable; it is a question of survival.”



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