Meeting the objectives of the Paris Climate Agreement requires phasing out coal over the next few years. According to research by Climate Analytics based on the latest IPCC report, all coal-fired power plants must be closed by 2030 in OECD and EU countries and by 2040 elsewhere. Besides, the IPCC Special Report on Global Warming of 1.5 °C’s P1 shows that 78% of existing coal-fired power generation capacity must be shut down by 2030. More than 6,700 power generation units are operating around the world. This constitutes an immense challenge, making the next few years critical.
A growing number of financial institutions recognise the imperative to exit the coal sector. This is reflected in the emergence of increasingly sophisticated coal policies and positions taken by French and international financial institutions in favour of closing existing infrastructure.
On July 2, 2019, French financial institutions, working through their professional federations, committed to adopting “a timetable for the overall exit from financing coal activities” by mid-2020 and to report on the policy in their extra-financial reporting from FY2020 onwards.
Financial institutions must commit to reducing their financial services and their portfolios’ exposure to coal to zero by 2030 in EU and OECD countries and by 2040 in the rest of the world at the latest. To achieve these objectives, they must exclude all coal developers and commit to progressively strengthen their criteria for excluding companies active in the sector.
Finally, they must immediately call on remaining companies in their portfolio to adopt a plan for closing all coal assets by January 1, 2022, allowing an exit by 2030 or 2040, depending on the geographical area. It is imperative to request the closure and not the sale of assets in operation and to require the adoption of such a plan before a set date. Failure to act should lead to sanctions, such as the suspension of all new investment after January 1, 2022, and set a new time-limited engagement process into action. Failure to adopt such a closure plan before January 1, 2023, for all coal assets must result in the company’ definitive exclusion.