Banking on coal – undermining our climate

Coal workers in Shizuishan, China. Photo: Flickr.com/ Bert van Dijk/CC BY-NC-SA

A new study reveals the top twenty international banks that are financing the coal mining industry and the hot spots of global coal production.

Coal is the single greatest source of carbon emissions endangering our climate. Yet never before has so much coal been mined on the planet as today. Since 2000, global coal production has grown by 70 per cent and has now reached a staggering 7.9 billion tons annually. And what’s more, the industry is still expanding. Who on earth is financing the enormous production increases in the world’s dirtiest fossil fuel?

The answer can be found in the new report “Banking on Coal”. Over the last eight years, 89 commercial banks poured a total of 118 billion euro into the coal mining industry. Nearly three quarters of this finance was, however, provided by only 20 banks. Together, these banks financed enormous coal mine expansions around the world.

At the top of the list are three US banks: Citi (€7.29 billion), Morgan Stanley (€7.23 billion) and Bank of America (€6.56 billion). Also among the top twenty are Swiss, German, Chinese, British, French and Japanese banks. Commercial lending to and investment banking services for 70 coal mining companies, which collectively account for over half of global coal production, was investigated in the study.

It was found that financial institutions from only three countries – the US, UK and China – collectively account for 57 per cent of coal mining finance. “It’s mind-boggling,” said Heffa Schücking, director of German Urgewald, one of the organisations that published the study, “to see that less than two dozen banks from a handful of countries are putting us on a highway to hell when it comes to climate change. Big banks already showed that they can mess up the real economy. Now we’re seeing that they can also push our climate over the brink.”

Coal finance has increased tremendously over the past few years. Since 2005 – the year the Kyoto Protocol came into force – bank finance for coal mining companies increased by 397 per cent. “This is a real danger,” said Kuba Gogolewski, of the CEE Bankwatch Network. “While policymakers are far too slow to regulate the mining and burning of coal, banks are speeding ahead with investments that are totally inconsistent with a stabilized climate.”

The investments of the top twenty banks contrast with their own statements and policies on climate change. Yann Louvel of BankTrack, who analysed these policies, pointed out that Bank of America claims to be “financing a low carbon economy”, Credit Suisse “cares for climate” and BNP Paribas thinks it is “combatting climate change”. Louvel said: “It’s as if banks have a split personality disorder. When they finance companies that blow up mountaintops or destroy jungles to extract coal, they have a responsibility for these impacts.”

The report also examines the “hot spots” of global coal production and the vastly destructive impacts that coal mining is having on India’s last tiger forests, on indigenous communities in Colombia or on scarce water resources in South Africa. For each of the global “hot spots” of coal production, the report reveals which financial institutions have played the lead role in financing the expansion of the industry.

Central Europe is one of the coal hot spots featured in the report, as Germany and Poland are among the world’s major lignite producers. Together they account for almost one quarter of the world’s lignite production.

If unchecked, the coal industry will continue to turn the heat up. According to the World Coal Association (WCA), 1,199 new coal-fired power plants are on the drawing board and global coal demand is expected to increase by 50 per cent by 2035. Major new coal mine developments are underway in many places throughout the world and global coal reserves are still growing, due to the industry’s aggressive exploration activities.

Source: Press release and report, 15 November 2013.
The report is published jointly by four organisations: Urgewald, Polish Green Network, BankTrack and CEE Bankwatch Network.

The “Hot Spots“ according to the report.

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