The report published by the Institute for Energy Economics and Financial Analysis (IEEFA) focuses on the exclusion policy of globally significant financial institutions. It highlights the fact that the global capital is fleeing the coal sector. It also mentions that this trend is not a passing fad and the momentum against coal is only going to build further.

Today, over 100 globally significant financial institutions have divested from thermal coal, including 40% of the top 40 global banks and 20 globally significant insurers.

Since January 2018, a bank or insurer announced their divestment from coal mining and/or coal-fired power plants every month, and a financial institution who had previously announced a divestment and/or exclusion policy tightened up their policy to remove loopholes, every two weeks. In total, 34 coal divestment/restriction policy announcements have been made by globally significant financial institutions from the start of 2018 to February 2019.

In the first nine weeks of 2019, there have been five new announcements of banks and insurers divesting from coal. Since 2013 more than 100 global financial institutions have made increasingly tight divestment/exclusion policies around thermal coal.

When the World Bank Group moved to exit coal in 2013, the ball started rolling. Following, Axa and Allianz become the first global insurers to restrict coal insurance and investment respectively in 2015, and their policies have subsequently been materially enhanced. Next, some 35 export credit agencies (ECA) released a joint statement agreeing to new rules restricting coal power lending. In the same year, the China-led Asian Infrastructure Investment Bank trumpeted its global green credentials with the Chairman confirming the Bank was in practice ruling out finance for coal-fired power plants.

One of the strongest moves in 2015 came when the world’s second largest sovereign wealth fund based in Norway (US$1 trillion of AUM) stepped up its exclusion criteria and started divesting from coal. When such a significant investor acts, global momentum increases.

In May 2018, Dai-ichi Life of Japan issued a new policy announcing it would no longer insure coal. Sumitomo Mitsui Trust Bank ruled out coal-fired power plant lending soon after. In September 2018 Standard Chartered announced the end of lending for new coal plants, anywhere in the world.

The report concludes that while there is a positive progress being made, it is far from sufficient. Governments and civil society must continue to hold these global financial institutions to look beyond their myopically near-term horizons and align their policies with global accords such as the Paris Agreement.

1. Every two weeks a bank, insurer or a lender announces new restrictions on coal highlighting the fact that global capital is fleeing the coal sector. Investors have called for a global price on carbon emissions and a thermal coal-plant phase out across the entire OECD by 2030, throughout China by 2040, and across the rest of the world by 2050.
2. Over 100 globally significant financial institutions have developed formal thermal coal mining and/or coal-fired power plant restriction policies since 2013. It is clear that global investor and debt capital are fleeing coal at an increasing rate, and it is foreseeable that thermal coal and power plants become un-insurable in the medium term. As a leading example, private finance in India for a new power plant is no longer available.
3. One of the factors driving the global acceleration of coal divestment and climate policy statements stems from the Task Force on Climate-related Financial Disclosures (TCFD). This is important given financial institutions both own, insure and lend to virtually every company in the world, and any evaluation of climate risk requires clarity, transparency and reporting on systemic risks in their underlying asset and liability exposures.
4. The significant proliferation of renewable energy projects coupled with consistent deflation in fossil fuel prices is another key factor leading to divestment. It has led to decrease in the utilisation factor of existing coal power plants making most of the coal power projects financially unviable compared to renewable energy projects.
5. The Nordic region, specifically the Norwegian funds, are leading the divestment race. Storebrand, Norway's largest private asset manager holding US$85bn of AUM has been excluding companies associated with coal since 2013 and continues to progressively tighten their definition each year. Norway’s largest pension company KLP (US$81bn AUM) and Norway's US$1 trillion sovereign wealth fund started divesting from coal and other fossil fuel projects in 2018 and 2015 respectively.
6. Up to February 2019, 20 globally significant insurers with more than $6 trillion in assets and representing 20% of global insurance assets (which stand at US$30 trillion in aggregate) have adopted coal divestment policies, including the four largest European insurers. When smaller insurers and their partial divestment are included, the total is 25 financial institutions globally.
7. Thirty-four globally significant private banks have thermal coal lending restrictions in place up to February 2019. Particularly for the private sector, climate policy statements have both commonalities and individual nuances. These banks include Credit Agricole S.A., Morgan Stanley, Citibank, JP Morgan Chase, Deutsche Bank to name a few.
8. Almost all financial institutions still fail to properly implement policies aligned with the Paris Agreement which targets limiting global temperature rises to 1.5-2.0℃. Full alignment would require evaluating and incorporating the International Energy Agency (IEA)’s Beyond 2℃ Scenario (B2DS), rather than the New Policy Scenario (NPS) or IEA’s Sustainable Development Scenario (SDS).
9. Actual progress to restrict coal lending by the world’s top two fund managers with a collective US$11 trillion of assets under management have been less than impressive. Both BlackRock and Vanguard have been underwhelming in terms of failing to vote against board members who are climate deniers.