Energy transition: UK banks and investors still backing coal
Despite the UK’s pledges to reduce its carbon emissions, new data sent to Capital.com reveals that British banks provided $62bn (€54.6bn, £45.7bn) to the global coal industry in the form of loans and underwriting between January 2019 and November 2021.
As a result, the UK – along with the US, China, Japan, India and Canada – was among the six countries found to be responsible for over 80% of coal financing and investment during that period. The analysis was published by campaign groups Urgewald and Reclaim Finance, alongside more than two dozen other non-governmental organisations (NGOs).
Katrin Ganswindt, head of financial research at Urgewald, gave Capital.com a further breakdown of Britain’s involvement in coal financing.
“Between January 2019 and November 2021, British banks provided a total of $62bn to the global coal industry in the form of loans and underwriting. Looming largest among them is Europe’s biggest coal banker Barclays, with $33bn,” she said.
“As of November 2021, British institutional investors held coal bonds and shares to the tune of $49bn, with Abrdn ($7.4bn total) and Legal & General ($7.3bn total) head and shoulders above the rest. These numbers make the UK a top-five financier and investor of coal worldwide. While the UK says it will phase out coal by the mid-decade, its money is still fuelling global coal,” Ganswindt added.
Urgewald also highlighted that Barclays is a member of the Glasgow Financial Alliance for Net Zero (GFANZ), despite the money it has banked in the coal industry.
The news comes in the same week that the bank revealed it has signed a 10-year power purchase agreement (PPA) with BP.
“While Barclays’ operations are already carbon-neutral, the agreement will allow the bank to source a large proportion of its UK electricity demand from renewable projects that provide additionality to the grid,” Barclays said in a press release.
“Barclays has committed to purchase up to 250 gigawatt hours (GWh) per year of power and associated Renewable Energy Guarantees of Origin certificates from additional new-build renewable power assets, helping to accelerate the UK’s energy transition and create green jobs,” it added.
Comments from chief coal lenders
Meanwhile, the new data on coal investment shows that Japan’s Mizuho Financial, Mitsubishi UFJ Financial and SMBC Group were the top lenders providing loans to the industry, followed by Barclays and Citigroup.
“These financial institutions must come under fire from all quarters: civil society organisations, financial regulators, customers and progressive investors,” Ganswindt added, saying that unless the financing of coal is stopped, “it will end us”.
Capital.com contacted Barclays for comment, as well as Mizuho Financial, Mitsubishi UFJ Financial, SMBC Group and Citigroup.
A spokesperson from Barclays sent the following response to Capital.com: “Since the publication of our Energy and Climate Change Statement in January 2019, we have committed to not provide any project finance for the construction or material expansion of coal-fired power stations or the development of greenfield thermal coal mines anywhere in the world.
“In 2020, in recognition of the fact that Barclays should go further in this area, we committed to not provide general corporate financing that is specified as being for new or expanded coal mining or coal-fired power plant development, and have introduced tightened restrictions on financing of thermal coal mining and power clients.
“In November 2020, we also set a target for a 30% reduction in the CO2 intensity of our Power portfolio by 2025, as well as a target for a 15% reduction in absolute CO2 emissions of our Energy portfolio by 2025.”
Mitsubishi UFJ Financial Group (MUFG) also sent a response to Capital.com: “MUFG takes its mission of contributing to the sustainable growth of clients and society seriously, and is therefore committed to operating in a manner that is both socially responsible and in accordance with the long-term developmental requirements of the markets that it operates in.
“As part of this commitment, we have announced our intent to achieve net-zero emissions in our finance portfolio by 2050 and in our operations by 2030.
“We have also revised our Environmental & Social Policy framework not to provide financing to any coal-fired power-generation projects except those equipped with CCUS [carbon capture usage and storage], mixed combustion, and other technologies necessary to achieve the Paris Agreement target. This took effect from June 1, 2021,” the bank said.
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Developing new coal plants
In a further breakdown, Urgewald, Reclaim Finance and over 40 other partner organisations also highlighted that of the 1,030 companies listed on the 2021 Global Coal Exit List (GCEL), 503 companies (49%) are still planning to develop new coal-power plants, new coal mines or new coal transport infrastructure.
“Up to 480GW of new coal-fired power capacity and 1,800 million tonnes per annum of new thermal coal-mining capacity are still in the pipeline. If realised, these projects would increase the world’s coal-power capacity by 23% and thermal coal production by 27%,” the groups said.
Coal exit dates lagging behind
The organisations further claimed that since the Paris Climate Agreement was signed, the world’s installed coal-fired capacity has grown by 157GW – an amount equal to the operating coal plant fleets of Germany, Russia, Japan and Turkey combined.
“Only 49 of the 1,030 companies – in other words, 5% – on the GCEL [Global Coal Exit List] have announced a coal exit date. And in one-third of these cases, the coal exit dates are far too late. Cases in point are the Japanese trading house Marubeni and Japan’s Sumitomo which plan for a late exit and are still building new coal plants.
“Other issues are related to the decision to sell instead of close assets (eg, BHP, Anglo American, Glencore) or to convert coal plants into biomass or gas (for example, Engie). Other companies block the transition while suing against coal closures (RWE, Fortum/Uniper),” the groups added.
Heffa Schuecking, director of Urgewald, said many financial institutions justify their continued support of the coal industry by claiming that they want to help their clients transition. “But” said Schenuecking, “our research shows that the vast majority of companies on the GCEL are not transitioning.”
Lucie Pinson, director of Reclaim Finance, said: “This is the decisive decade and we will all pay the price if financial institutions don’t rapidly consign coal financing and investing to the history books. Adopting a robust coal policy must become the top priority of any financial institution that has pledged to achieve carbon neutrality by 2050.”
Paddy McCully, a senior energy analyst at Reclaim Finance, added that it was time financiers “stop waffling” about climate and start insisting that all companies they support implement robust coal phase-out plans.
“These must ensure that most of the world’s coal-power plants and mines are shut down by 2030, that plant closures are actual closures and not just conversions to fossil gas or biomass, and that funds are set aside for just transitions for workers and communities,” he said.