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Coal firms bolstered by $1.5tr in funding from major banks despite climate pledges

Commercial banks have provided over $1.5tr (£1.1tr) in lending to the global coal industry over the past three years, even though many have pledged to become net zero organisations, an analysis has uncovered.

As of November 2021, the month COP26 took place in Glasgow, institutional investors held over $1.2tr in global coal industry stocks and bonds, according to research from German environmental group Urgewald.

The findings are based on the global coal company database, the 'Global Coal Exit List', which is maintained by Urgewald and was last updated in October 2021. It covers 90 per cent of the world’s coal production and coal-fired power plant capacity.

The research also shows that around half of the credit volume can be traced back to just a handful of financial institutions.

Katrin Ganswindt, head of financial research at Urgewald, said: “[It is] widely known that the coal industry is the number one driver of the climate crisis.

“Financial institutions like to argue that they want to help the industry transform. But the reality is that almost none of the coal companies are on a meaningful transformation path and, alarmingly, they are still expanding.

“They have no incentive to change if the financial industry continues to support them with blank cheques.”

Between January 2019 and November 2021, 376 commercial banks lent $363bn to the global coal industry. Twelve banks accounted for 48 per cent of the total credit volume.

In the global ranking of lenders, Japanese banks Mizuho Financial, Mitsubishi UFJ Financial and SMBC Group ranked first to third, followed by the UK’s Barclays and Citigroup from the US.

Ten of the top 12 coal lenders, including the top five previously mentioned, are members of the 'Net Zero Banking Alliance'. This Alliance is comprised of firms which have committed to aligning their lending and investment portfolios with net zero emissions by 2050.

Underwriting now takes the lion’s share of financing the global coal industry, but it is currently not included in the commitments within the Alliance.

Banks from just six countries are responsible for 86 per cent of all bank financing for the coal industry. Canada and Great Britain, as the founders of the 'Powering Past Coal Alliance', stand out in particular, the researchers said.

As of November 2021, more than $469bn - 38 per cent of the $1.2tr total - was invested in stocks and bonds of expanding coal companies along the value chain.

The lead investor was BlackRock with over $34bn. The coal plant developers in BlackRock’s overall portfolio alone plan to build over 200GW of new coal plant capacity, which is equal to the coal power capacity of the current fleet of Russia, Japan, Indonesia, Poland and Germany combined.

A report from last summer found that China, the largest consumer of coal, committed to a series of carbon-intensive coal and steel projects in the first half of 2021.

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