Dec 21, 2021
With a new analysis in hand, an international climate advocacy group on Tuesday demanded that banks and investors worldwide use their leverage to force the coal industry to more rapidly end their planet-wrecking operations.
"Credible transition plans are all the rage, but our analysis reveals that the overwhelming majority of coal companies have no such thing."
The new report by Paris-based Reclaim Finance--entitled The Coal Companies Watchlist: How finance can accelerate the coal phaseout--makes the case that the financial industry must force polluters to develop and implement plans for a "rapid global phaseout of coal" that align with the Paris climate agreement's goal of limiting temperature rise by 2100 to 1.5degC above pre-industrial levels.
The watchlist follows a global coal reduction deal at the COP26 summit in Scotland last month. It also comes as the world endures extreme weather exacerbated by climbing temperatures and the financial sector faces rising scrutiny for contributing to the climate emergency.
Noting that at least 30 financial institutions around the world have called on mining and power companies to adopt roadmaps to phase out coal by 2021 or earlier, Reclaim Finance reviewed the exit plans of dozens of businesses facing such demands from their financiers.
As the group's executive director, Lucie Pinson, put it: "Credible transition plans are all the rage, but our analysis reveals that the overwhelming majority of coal companies have no such thing, with exit plans either nonexistent, or strewn with delays and loopholes."
"For the banks and investors backing them, the choice is clear: suspend services to companies failing to transition in line with the 1.5degC target or be complicit in climate chaos," she said.
\u201c94% of analyzed companies don\u2019t have credible coal exit plans:\n\n\ud83d\udcc8 13 out of 47 are still developing new coal\u2026\n\ud83d\udd65 26 will exit coal after the deadlines set by science\n\ud83c\udfed 5 shrug off their responsibilities (selling or converting coal facilities to gas or biomass).\u201d— Reclaim Finance (@Reclaim Finance) 1640074768
The review revealed that 94% of the 47 analyzed companies have "no credible coal exit plan." According to the report:
- Only three out of 47 analyzed companies' plans (6%) meet all the basic criteria of a credible coal phaseout (no expansion, adequate timeline, and commitment to shut down assets);
- 28% of analyzed companies are still coal expansionists and have not even yet recognized the absolute necessity of stopping the development of new coal capacity;
- 55% of companies do not plan to retire their coal assets by 2030 and 2040, thereby failing to align with a 1.5degC pathway; and
- The remaining 11% of analyzed companies do provide an adequate phaseout calendar but fail to shut down their assets: by selling coal mines and plants or converting them to gas and biomass--two other unsustainable energy sources--the only thing these companies are greening is their public profile, with no material effect on climate change.
"Despite their dismal record in terms of coal phaseout plans, the companies analyzed here continue to benefit from a high level of support from financial institutions," the report notes. "In 2021, BNP Paribas, BPCE, Credit Agricole, Societe Generale and Unicredit--all the largest banks that have demanded coal phaseout plans--have provided over $9 billion of new financing to these coal companies."
The findings, Reclaim Finance argues, "illustrate the flaws associated with financial institutions' current approach to engaging coal companies" and the need for an immediate shift in strategy.
"This research unveils an unfortunate truth: As things stand, engagement practices are just not working," said Guillaume Pottier, stewardship campaigner at Reclaim Finance. "A vanguard of financial institutions might be making demands for phaseouts of coal companies, but they are failing comprehensively, due to inadequate timelines and a lack of sanctions."
"At best this approach is ill-conceived, at worst it represents straightforward greenwashing," Pottier said. "Engaging polluting companies is an important tactic, but only when demands are robust and backed up with the threat of divestment."
\u201cOur Coal Companies Watchlist provides banks & investors with the information they need to strengthen their dialogue with coal companies \ud83d\udd3d\ud83d\udd3d \n\nIt\u2019s time to show that they are serious about engagement, not just using it as an excuse to avoid divestment!\nhttps://t.co/70Yny62hgH\u201d— Reclaim Finance (@Reclaim Finance) 1640074768
The report asserts that "with time fast running out to slash global emissions, it is imperative that all private financial institutions immediately adopt robust coal exit policies including the conditioning of their financial services on the adoption of Paris-aligned coal phaseout plans by specific deadlines."
"Financial institutions must also step-up their game in terms of engagement," the report adds, "and stop using vague demands for coal phaseout plans as an excuse not to exclude coal companies."
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