Big banks embracing coal despite cutback vow
Activist groups criticize top U.S. companies for lending millions to firms
Starting three years ago, the largest U.S. banks vowed to cut back on lending to the coal industry.
“The bank has a responsibility to help mitigate climate change by leveraging our scale and resources to accelerate the transition from a high-carbon to a low-carbon society,” Bank of America said in its coal policy in May 2015.
But the banks never actually promised to walk away from coal completely and are now, again embracing the industry.
At the time of the pledges, the three biggest coal mining companies were in bankruptcy, the United States was signing a pact to reduce carbon emissions, and cheap natural gas was forcing coal-fired power plants out of business. There were few coal loans to make.
But Peabody Energy, Arch Coal and Alpha Natural Resources have emerged from bankruptcy, their balance sheets scrubbed clean. U.S. President Donald Trump has vowed to support industry.
Five of the country’s biggest banks are lending tens or hundreds of millions of dollars to coal companies, in one case eclipsing what they lent in 2014, before the industry entered a nose dive, according to an analysis by Rainforest Action Network, a liberal environmental group.
JPMorgan’s coal lending increased to $654 million (U.S.) in 2017 from $32 million in 2015, according to the analysis. That was more than the $570 million the bank lent to coal interests in 2014. The vast majority of JPMorgan’s coal loans in 2017 were to Peabody, which emerged from bankruptcy that April.
Morgan Stanley’s coal loans, though well below 2014 levels, more than doubled from 2015 to 2017. And though their loans to coal companies haven’t quite reached earlier levels, Goldman Sachs and Bank of America added new coal loans last year, analysis shows. Citigroup made more loans in 2016 and 2017 than it did in 2015, though below its 2014 figure. Combined, the five issued about $1.5 billion in new coal-related loans last year, says Rainforest Action Network.
The analysis includes loans to companies such as Glencore and BHP Billiton, which produce commodities like copper and oil in addition to coal. It weigh each loan based on the percentage of the company’s business that comes from coal. Fifteen per cent of Glencore’s assets are in coal, for example, so a $229 million loan that Bank of America made to Glencore last year was given a value of $34 million. The analysis looked only at new loans, not at the banks’ overall exposure to the coal industry. Some banks initially vowed to curb lending to new coal-fired power plants in wealthy countries and to plants not using pollution-mitigating technology.
In November 2015, for example, Morgan Stanley said it would reduce financing for projects using “mountaintop removal,” in which mountains are dynamited to reveal coal seams. In March 2016, JPMorgan said it would eliminate such financing, as well as stop lending to new coal mines.
Representatives of Citigroup, Goldman Sachs and Morgan Stanley declined to comment.