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6 May 2021

Researchers blast City of London for $56 billion of coal funding

Reclaim Finance, working with Urgewald, has published a report detailing the massive funds which the British financial sector continues to make available to companies in the “Global Coal Exit List” (GCEL).

Five of Britain’s leading banks, the report says, put $56 billion into such companies from October 2018 to October 2020, while investors started the year with $47 billion in these GCEL companies. Besides the numbers, the report also details continued support from banks and investors for companies which plan to expand their coal interests.

The Global Coal Exit List is maintained by Urgewald, and consists of every company in the coal industry that Urgewald can find – mining, power producers, exploration, processing, trading, transport, equipment manufacturing, O&M, and EPC, coal-to-liquids and coal-to-gas. So far, the List has grown to 935 parent companies and 1,800 subsidiaries and joint ventures.

Barclays and HSBC topped the list of banks, with $27 billion and $15 billion loaned to GCEL companies over the two years. Those two banks, together with Standard Chartered, accounted for 94% of total British coal finance in the period – just a handful of organizations can demolish coal financing if they change their minds. Perhaps if everyone who banks with them withdrew their assets, it would help them change their minds.

As the report notes, this finance includes Bangladesh’s planned coal expansion – so if a big enough stink is raised, a whole country can have its emissions and air pollution issues eased as institutions back off from financing new coal plants. We’ve seen precisely the same thing in Vietnam, although in that case it was aided by a massive solar buildout and popular hostility to coal for air quality reasons. Bangladesh has less available land and may struggle to switch to renewables in the absence of a middle class or government able to fund rooftop installations, but it doesn’t need to go full coal.

As for investors, the report details fully 17 of them which entirely lack a coal exit strategy. But even those which do have coal exit strategies, which is most investors and all banks mentioned in the report, haven’t had to change their behavior yet – at least not to such an extent that we don’t see this $50 billion involvement in coal from the group.

Urgewald’s Global Coal Exit List is intended for precisely this use, exposing and campaigning against coal financing. The Zurich Insurance Group has complimented it for being “the only data source which assesses private companies,” but the big question is how much impact it has, and how many organizations use it.

It is being promoted by fellow NGOs and the UN, but ultimately it is the big financiers and governments which need to use it. Countries such as the UK and Japan have promised to end state-backed financing for coal, so when they extend that to the private sector as South Korea has, this is the sort of  weapon they need to have at their disposal.

The Global Coal Exit List excludes companies whose coal activities are very minor both in absolute terms and relative to total revenue. However, the thresholds are becoming more stringent: the 2017 to 2019 threshold for revenue/power production was 30%, and absolute thresholds for coal generation were 20 Mt and 10 GW; in 2020, the List tightened to 20%, 10 Mt and 5 GW.

For now, the List also excludes coal use in cement and steel production. That too can be expected to change once hydrogen, CSP or direct electrical processes make decarbonization possible for those industries.