Major U.S. banks are using "loopholes" in their own climate action policies to increase levels of financing for coal companies, a new report published by Rainforest Action Network, or RAN, concluded.
RAN analyzed six large U.S. banks and found 2017 was a "year of major backsliding on coal mining finance." The banks released policies in 2015 and 2016 committed to reducing credit exposure to the coal mining industry, but the policies were written in a way that allowed money to continue to flow to the coal sector.
Total coal industry financing by the six banks fell from $4.24 billion in 2015 to $1.40 billion in 2016, RAN's report states. However, that figure climbed to $4.69 billion in 2017.
"The numbers show that U.S. banks are in step with Trump's pro-coal agenda," said Patrick McCully, climate and energy program director at RAN. "With an administration that's pushing us backwards, financial institutions must do their part to limit warming to 1.5 degrees Celsius."
The companies analyzed by RAN were Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley and Wells Fargo & Co. While Goldman does not have an exposure reduction commitment, as of the end of the second quarter it increased exposure to coal companies by 50% since putting in place a "more narrow coal-related policy" in November 2015, according to the report.
Citigroup increased its coal financing by just 16% between 2016 and 2017, the RAN report said, while JPMorgan Chase increased coal financing 3,014%. The timing of the increased financing coincides with a period in which coal industry prospects had greatly improved following bankruptcy court restructurings, improved seaborne coal pricing and the transition to a more coal-friendly presidential administration.
While banks "appear to be broadly in compliance with their coal mining policies," increases in coal financing were possible because of what RAN called "significant loopholes" in the banks' policy commitments. For example, several of the banks limited their commitment to excluding pure-play coal mining companies from financing or extended the restrictions only to certain types of loans.
RAN analyzed the banks' exposure to the top 50 coal mining companies by coal production including Coal India Ltd., Peabody Energy Corp. and Glencore PLC. Combined, the 50 companies represent about 64% of global annual coal production, the report states.
The report notes that all six banks have sharply reduced coal mining financing and appear to be on track for a "major drop" in total investment in the sector in 2018. The six banks only offered about $383 million in coal financing in the first of 2018, it said, compared to $3.39 billion in the same period a year ago.