The U.S. accounts for about 58% of institutional investments related to the coal sector, and commercial banks worldwide have steadily provided more money to the industry via underwriting and lending each year since 2016, according to a new report.
Japanese banks were identified as the top lenders while Chinese banks were the top underwriters for the coal sector, according to the new report from Urgewald, Reclaim Finance, Rainforest Action Network, 350.org Japan and 25 other nongovernmental organizations. The research analyzes financial flows to 934 companies on the Global Coal Exit List produced annually by Urgewald, an environmental and human rights organization.
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The groups wrote that in 2016, banks provided $491 billion through lending and underwriting to companies on Urgewald's coal exit list. Despite the Paris Agreement on climate change intensifying calls to lower greenhouse gas emissions worldwide, that figure has steadily climbed since, growing almost 11% to $543 billion by 2019. Based on preliminary data, the group wrote the total was likely at least as high in 2020, despite the COVID-19 pandemic.
Coal funding has come under scrutiny as the global business community targets significant emissions reductions to align with the Paris Agreement on climate change.
The report states that in January 2021, 4,488 institutional investors held investments totaling $1.03 trillion in companies involved in the thermal coal value chain. Vanguard Group Inc. and BlackRock Inc. were identified as the largest institutional investors, with respective holdings of $86 billion and $84 billion in coal-related investments.
BlackRock has stepped up its efforts to engage with the companies it works with on climate change issues but maintains substantial fossil fuel investments. The company pledged to exit certain investments tied to thermal coal in early 2020, but the policy only applied to BlackRock's discretionary active investment portfolios and did not exclude many large diversified miners. BlackRock Chairman and CEO Larry Fink told companies to start planning for a "net-zero world" in his 2021 annual letter.
The research also identified 381 commercial banks providing $315 billion in loans to the coal industry over the two-year period between Oct. 1, 2018 and Oct. 31, 2020. The top lenders were the Japanese banks Mizuho Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. Other top lenders to the coal sector identified in the research include U.S.-based Citigroup Inc. and U.K.-based Barclays Bank Plc.
Commercial banks from the United States, the United Kingdom and Japan accounted for 52% of all loans to companies on the Global Coal Exit List.
The group also identified 427 commercial banks that provided underwriting services worth $808 billion to companies on the list in the two-year period. Chinese banks accounted for 58% of underwriting to the coal industry over the two-year period.