Aware of the environmental, social and financial risks associated with the coal sector many global banks are making the move away from coal, sixteen global banks have ended direct financing of new coal-fired plants. However, few banks have implemented a policy to end indirect financing of coal which includes general corporate lending and other financial services such as underwriting.

This means bank financing continues to enable the construction of new coal-fired power plants. Since signing the Paris Agreement in 2015, the top 120 coal power plant developers have received US$ 275 billion from global banks through indirect financing.

This briefing highlights the continued investment into coal by the banking industry which is reflected in the over 650,000 megawatts (MW) of new coal-power infrastructure in development. Most of which is planned for developing nations such as India, Vietnam, Indonesia, and Bangladesh. Similarly, it calls to action investors to engage with their shareholdings to encourage more stringent coal polices. Including four reasons why the banking sector’s exposure to coal should concern investors. They are as follows:

• The $8.3 trillion coal bubble – Expansion of thermal coal infrastructure anywhere in the work has been shown to be incompatible with the Paris Agreement. To achieve the <2oC global temperature rise the International Energy Agency (IEA) has demonstrated that 1,715 gigawatts (GW) of coal power capacity should be retired early equating to all coal-power plants in China, USA, Japan, Germany and Poland combined.
• Debunking the ‘coal for development’ argument – given that 84% of the world’s electricity poor households live rural areas out of reach to the coal-powered electricity grid, developing nations have the opportunity to leapfrog the fossil fuel-powered phase of twentieth-century development by focusing instead on new technology.
• Developing nations do have affordable renewable alternatives – Renewable energy infrastructure is fast becoming the most economical energy source in the world. The cost of solar PV between 2009 and 2017 dropped 72%. Furthermore, off the grid technologies can provide a solution to the energy needs of rural areas without access to the power network or storage.
• The human impact of coal – Research by Harvard University estimates there will be nearly 70,000 premature deaths per year in South-East Asia from coal-related air pollution by 2030. Financing of coal is also in direct contradiction of Sustainable Development Goal (SDG) number seven: ensuring access to affordable, reliable, sustainable and modern energy.

Finally, the briefing ends with a call to action to investors and highlights that investors play a key role in aligning banking coal policy with the Paris Agreement. It recommends that investors should engage with banks and recommend the following:

• A prohibition of project finance to new coal mines and coal-fired power plants anywhere in the world
• A prohibition of general corporate financing and advisory services to companies that are highly dependent on coal mining or coal power
• A clear, time-bound plan to phase out existing exposure to coal-related projects and companies.

1. Although many banks have agreed to end direct financing of the coal sector, few have implemented policy to stop indirect financing such as general corporate lending and underwriting.
2. There are 650,000 megawatts (MW) of new coal power infrastructure is in active development. This is in direct contradiction of the Paris Agreement and Sustainable Development Goals.
3. To achieve the target of <2oC global temperature rise, no new net-positive emission power plants can be built anywhere in the world and existing infrastructure will have to be retired early.
4. The global appetite for coal is changing. Over 20 countries have joined the global Powering Past Coal Alliance since 2017. Losses from stranded assets in the coal sector are estimated to be US$7.8 trillion by 2060.
5. Developing nations have the opportunity to leapfrog the fossil-fuel stage of twenty-first-century development as renewable energy technologies become more economical.
6. Investors have a key role to play in influencing banks to align their coal policies with the goals of the Paris Agreement and Sustainable Development Goals.