Money is still flowing into the coal industry.
The Coal Policy Tool is here to stop it.

The coronavirus pandemic and its social, economic, and financial consequences are an example of the many crises the world will face if financial institutions do not urgently phase-out all financial services for fossil fuel companies and projects. After a lost decade of climate inaction, we must tackle all fossil fuels: coal, gas, and oil. Coal remains a significant barrier to achieving the international goal of limiting global warming to 1.5°C above pre-industrial levels.

236 financial institutions currently have policies restricting financial services to the coal sector. However, while there is a growing narrative that coal is dead and that financiers are staying clear, research shows that 505 global banks channelled $745 billion for companies with coal power expansion plans through loans or underwriting services from January 2017 to Q3 2019. As of September 2019, 1922 investors held nearly $276 billion in bonds and shares issued by 256 coal plant developers. 164 top financial institutions don’t have any policy on coal.

Consequently, despite global consensus about the need for a timely coal phase-out, the world’s coal power generation capacity grew by 135 GW—an amount equal to the combined coal power production of Germany, Japan and Russia—since the signing of the Paris Agreement. New coal plants are still being planned or developed in 60 countries around the world.

The questionable quality of coal policies

The number of investors, insurers and banks with policy guidelines restricting their support to the coal sector is growing rapidly.

However, not all policies are created equal and the details of adopted policies vary dramatically. Many policies are still merely window-dressing and public relation stunts, with little to no concrete impact on the thermal coal industry.

  1. (1) Policies rarely cover the entire value chain, from mining to power through infrastructure.
  2. (2) Policies rarely stop all financial services, including corporate and project financing, underwriting, and passive fund management.
  3. (3) Policies rarely combine exclusion and shareholder engagement to not only prevent the expansion of the coal sector, but to also support its phase-out.

Financial institutions are extremely creative when it comes to integrating subtle legalese that would undermine or altogether negate the claimed aims of their coal policy. One must be able to read and understand the fine print of it to truly appreciate what policies (fail to) achieve. Many, if not most financial institutions have poor knowledge of the coal industry and its actors, as well as how the sector should evolve to align itself with climate targets. Not surprisingly, policies are not sufficiently sophisticated to tackle the intricacies of coal-related issues.

A tool against greenwashing,

for high-quality coal policies

The Coal Policy Tool is made to enable clients, media, financial institutions, and other stakeholders to easily understand the essentials of each policy and compare insurers, banks, asset owners and asset managers policies, across categories and geographies. The Coal Policy Tool makes navigating the “policy jungle” easy.

The tool is not just about counting and comparing total policies. Its main goal is to encourage high-quality coal policies. As banks, insurers and investors consider new policies or seek to revise older policies, understanding the details of these policies is critical to ensure they deliver on the Paris Agreement goal to limit global warming to a maximum of 1.5°C above pre-industrial levels.

In a simple visual way, the Coal Policy Tool provides an answer to the key question: Will this policy help us stay within the 1.5°C limit? Thanks to a detailed scoring and analysis, it shows what each policy is missing and which next steps each financial institution should focus on.

Reclaim Finance also developed the Oil & Gas Policy Tracker, a dedicated tool to assess and support the adoption of robust oil and gas exit policies by financial institutions. High-quality coal exit policies are just the beginning towards a fossil-free future.