Commercial Banks and Coal: A Policy Analysis
Introduction:
In spite of the adoption of the Paris Climate Agreement in 2015, global CO2emissions reached the all time high of 33 Gigatons in both 2018 and 2019.
And while innumerable reports from the UN, the IPCC, the IEA and otherinternational institutions have consistently warned that coal is the single
largest source of CO2 emissions heating up our planet, the world’s coal plant
Jleet still continues to grow. Since the Paris Agreement was signed, theworld’s installed coal capacity grew by 105 GW – an amount equal to thecombined coal plant Jleets of Germany and Russia.
The implications of the Paris Climate Agreement for new coal investments
are clear. In 2015, Christiana Figueres, who was then head of UNFCCC
warned: “There is no space for new coal”.1 And in 2015, the Secretary
General of the OECD, Angel Gurria called new coal plants the “most urgent
threat to our climate.”2 Commercial banks and other Jinancial actors need toheed these warnings and end all support to new coal projects and tocompanies with coal expansion plans.3The larger challenge, however, is to phase out existing coal. According to the2018 report of the Intergovernmental Panel on Climate Change (IPCC),primary energy use from coal must be reduced by 78% by 2030 in order tokeep the 1.5°C target within reach. This means that coal-Jired capacity inOECD countries must be phased out by 2030 and in the rest of the world by2040 at the latest. In order to be in line with these targets, commercial
banks must rapidly roll back corporate lending, investment banking and
1 https://www.theguardian.com/environment/2015/may/04/un-climate-chief-says-

the-science-is-clear-there-is-no-space-for-new-coal
2 https://unfccc.int/news/coal-investments-most-urgent-threat-to-climate
3 This includes not only the construction and development of coal plants, coal mines andother coal infrastructure, but also the life time extension of coal assets through retroJitting and acquisition sales.

other Jinancial services to the coal industry. A coal exit in the real world can
only be achieved if Jinancial actors phase out their support to the industry
long before we reach the 2030 and 2040 roadmarks.
Our ability to prevent the destabilization of our climate system depends not
only on governments, but also on the Jinance industry. Behind each newcoal plant and coal mine, there are banks, investors and insurers without
whom these projects could not be realized. This brieJing analyzes thepolicies adopted by commercial banks on coal since 2015. It lays out the key
elements of a good bank policy and provides an overview of institutions
that have begun moving in the right direction. It also identiJies the policy
gaps that commercial banks must quickly address if they aspire to become
responsible climate actors.
Elements of a Good Bank Policy on Coal
1. No project ?inance for new coal plants, coal mines or other coalinfrastructure.
Many of the world’s largest banks already have policies in place that exclude
direct Jinancing of new coal projects.
As of May 2020, 30 commercial banks have adopted policies stating they
will not provide project Jinance for the development of new coal mines.
Among these banks are Goldman Sachs, Standard Chartered, Santander,
Deutsche Bank, BNP Paribas, Cré dit Agricole, Credit Suisse, DBS, NAB andING.
37 commercial banks have committed to no longer participate in project
Jinance deals for new coal power plants, regardless of where their locationis or which technologies are applied. Among these banks are, for example,BNP Paribas, Cré dit Agricole, Deutsche Bank, Barclays, UBS, KBC, Rabobank,US Bancorp, Ned Bank, DBS and OCBC.
An especially disappointing coal power policy was adopted by Japan’slargest commercial bank MUFG in May 2019. Although MUFG ’s policy statesthat the bank “will not provide Jinancing to new coal-Jired power
generation projects”, it also states that “exceptions may be considered”
depending on “the energy policies and circumstances of the host countries”.
This is a clear case of green washing and we have thus not included MUFG
in the list of banks that rule out direct Jinancing of new coal power projects.

2. Restrict corporate lending, investment banking and other ?inancial
services for coal mining companies and coal-based utilities.
Project Jinance is, however, only the tip of the iceberg as it accounts for asmall share of commercial banks’ overall support for the coal industry. The
bulk of banks’ involvement is through general corporate lending andinvestment banking, where banks assist coal companies in raising capitalthrough bond and share issues. Since May 2015, several major banks havethus begun restricting corporate Jinance for the coal industry. The bestpolicies cover both corporate lending and underwriting of bond and shareissues as well as other Jinancial services, such as advisory mandates.
2.1. Percentage-based exclusion criteria
17 major banks are now using coal revenue or coal power thresholds as abasis for screening out clients whose business models are dependent on
coal. While ABN AMRO, KBC, Socié té Gé né rale and Commerzbank4 use a50% threshold to exclude coal companies from lending and other Jinancial
services, other banks have begun adopting lower and more ambitious
thresholds. BBVA uses a 35% threshold, and UBS has adopted a 30%
threshold while Natixis and Cré dit Agricole have recently moved to a 25%
threshold. In February 2020, France’s 5th largest bank Cré dit Mutuel
adopted a 20% threshold. In the same month, RBS announced that it willstop lending and underwriting for companies above a 15% coal thresholdby the end of 2021, unless these companies have a transition plan in linewith the Paris Agreement.
While many of the above-named policies apply to both coal mining and coal
power companies, the policies of some banks such as Commerzbank andUBS only cover coal power companies. UBS’s policy also contains anadditional loophole: It allows an exemption for coal power companies above
the 30% threshold if they “have a transition strategy in place that aligns
with a pathway under the Paris Agreement.” UBS’ interpretation of thisclause is that companies whose coal phase-out date is in line with theircountry’s NDC (Nationally Determined Contributions) can remain in thebank’s portfolio. The bank, however, conveniently ignores the fact that thevast majority of NDCs are still not in line with the 1.5°C goal set out in theParis Agreement. In practice, this means that companies such as Germany’sRWE (Europe’s largest CO2 emitter) will stay in UBS’ portfolio.
Natixis’ and Cré dit Agricole’s coal policies are among the mostcomprehensive as they not only cover corporate lending and investment
4 Commerzbank will only apply this threshold from 2021 onwards.

banking for coal clients, but also apply to advisory services, coal-related
Jinancial derivatives, acquisition Jinance for coal assets and third-party
asset management and insurance.5 While Cré dit Agricole applies a 25% coalshare of revenue threshold to screen out clients from corporate Jinance,
Natixis uses a 25% coal share of revenue threshold for coal miners and a
25% coal share of power generation threshold for utilities. The latter caveat
is important as a utility’s coal share of power generation is a much more
precise measure of its coal dependence than a revenue threshold.
2.2. Using an absolute threshold to exclude the largest coal players
The Norwegian Government Pension Fund and several large European
insurers have recognized that percentage criteria are not sufJicient as they
only measure the relative importance of a company’s coal operations to its
overall business. The impact a company has on our climate, however,depends on the absolute size of its coal operations. These institutions havetherefore also adopted absolute thresholds to screen the largest coalplayers out of their portfolio, even if these companies do not meet therelative percentage thresholds outlined above. AXA and the Norwegian
Government Pension Fund therefore now exclude all companies whose
annual coal production exceeds 20 million tons or which operate over 10
GW of installed coal-Jired capacity.
Cré dit Mutuel is up to now the only bank that has included an absolute
threshold in its coal policy. The bank laudably applies even tighter
thresholds than the above-named investors. Cré dit Mutuel excludes allclients operating over 5 GW of installed coal-Jired capacity or producing
over 10 million tons of coal annually.
2.3. No corporate Jinance for companies with coal expansion plans.
Although percent-based exclusion thresholds are important, they do not
automatically screen out companies with coal expansion plans. According toresearch undertaken by Urgewald, around half of the world’s coal plantdevelopers aren’t captured through a 30% coal revenue or coal power
exclusion threshold.
Some Jinancial institutions have therefore begun blacklisting companies
that are planning to develop new coal-Jired power capacity. In 2017, theJinancial service provider Storebrand was the Jirst investor to exclude coalplant developers from its portfolio, but since then large European insurers
5 NGOs, however, criticize that two large coal companies seem to have been exempted from this policy by

one of Natixis Group’s asset managers.

such as AXA, Generali, CNP Assurances and Allianz have all followed suit.
AXA, for example, excludes all companies from its investment universe thathave plans to build over 300 MW of new coal-Jired capacity or to develop
new coal mines. And the insurance company Zü rich recently announced
that from 2021 onwards it will neither invest in nor insure companies thatare developing new coal mines or coal power infrastructure.
In June 2019, Cré dit Agricole became the Jirst private bank to set a new
standard for dealing with coal expansionists. Cré dit Agricole announced
that it will end its relationship with all clients that are planning to expand
thermal coal mining, coal-Jired power capacity, coal transport infrastructure
or coal trading. In February 2020, France’s Cré dit Mutuel also ended its
support of all companies with coal expansion plans.
Other commercial banks should follow these examples and stop providing
corporate lending, investment banking and other Jinancial services to ‘coal
expansionists’.
3. Putting an end-date on ?inancial support for the coal industry.
While several commercial banks have begun using different thresholds toscreen out companies whose business is heavily dependent on coal, this is
only the Jirst step. To stay within the limits deJined by the Paris Climate
Agreement requires a full phase-out of coal-based energy generation within
the next 1-2 decades. This in turn means that commercial banks and other
Jinancial actors need to put an end date on their support for the coalindustry and begin progressively tightening their exclusion criteria to meetthis commitment.
One of the Jirst movers in this regard was the Dutch bank ING. In December
2017, ING announced that from the end of 2025 onwards, it will no longer
accept utility clients with over 5% coal-Jired generation in their energy mix.
As ING’s Vice-Chairman Koos Tiummermans said: “We realize that
contributing to the Paris Agreement targets is also about making clear
choices in what we’ll no longer Jinance, especially when there are goodalternatives available.”6 ING’s policy, however, only covers coal power anddoes not address the rest of the thermal coal value chain.
In the meantime, investors such as Allianz or Storebrand have set dates fora phase-out of all their coal-related business lines and investments. And
several banks such as Commonwealth Bank of Australia, RBS, Socié té
6 https://www.ing.com/Newsroom/All-news/ING-further-sharpens-coal-policy-to-support-transition-to-

low-carbon-economy.htm

Gé né rale, Cré dit Agricole and Cré dit Mutuel - have all recently announced
dates by which their portfolios will be coal-free.
Commonwealth Bank, RBS and Cré dit Mutuel plan to exit the coal sector by2030 and Socié té Gé né rale has committed to reduce its coal exposure tozero by 2030 in OECD countries and by 2040 in the rest of the world. Cré dit
Agricole’s coal exit plan is also geographically staggered. The bank’s June2019 policy requires clients to put forward detailed plans by 2021 forclosing down coal assets in OECD countries by 2030 and the rest of theworld by 2040. An innovative aspect of Cré dit Agricole’s approach is that it
calls on companies to retire coal assets instead of simply selling coal minesor coal power stations to new owners – a step that generally prolongs theoperation of these assets.
Conclusion
In order to begin aligning their portfolios with the Paris climate goals, banksneed to adopt coal policies that cut support for companies planning coal
expansion, progressively restrict support for existing coal and put an enddate on all Jinancial services for the coal industry. The coal policy that meetsthese requirements best is the one recently adopted by Cré dit Mutuel. It
excludes all coal developers, uses a 20% coal share of revenue or coal power
generation threshold, applies absolute exclusion thresholds of 5 GW or 10
million tons of coal and sets an end date of 2030 worldwide for its
remaining coal investments.
The good news is that more and more commercial banks are beginning totake new coal exclusion policies on board. The bad news is that the steps
taken are often still too small and the pace too slow. Time is our major
challenge and banks must now scale up their ambition and speed up theiractions in order to meet the urgency of the crisis. Otherwise we will fail themost basic of all climate tests: leaving coal behind.
For more information contact:
Heffa Schü cking, Urgewald
heffa@urgewald.org
May 25th, 2020
Annex:
Banks that exclude project Jinancing for new coal plants:
ABN Amro, Barclays, BNP Paribas, CaixaBank, Citigroup, Cré dit Agricole, Cré dit Mutuel,Credit Suisse, DBS, Deka Bank, Deutsche Bank, DnB, DZ Bank, Goldman Sachs,

Handelsbanken, Helaba, HSBC, Intesa Sanpaolo, JPMorgan Chase, KBC, Lloyd’s, mBank,Natixis, Nedbank, OCBC, PNC, Rabobank, RBS, Santander, SEB, Socié té Gé né rale,Standard Chartered, Swedbank, UBS, UniCredit, UOB, US Bank
Banks that exclude project Jinancing for new coal mines:
ABN Amro, Barclays, BNP Paribas, CaixaBank, Citigroup, Commerzbank, Cré dit Agricole,Cré dit Mutuel, Credit Suisse, Danske Bank, DBS, Deutsche Bank, Erste Group, Goldman
Sachs, Handelsbanken, Helaba, HSBC, ING, Intesa Sanpaolo, JPMorgan Chase,KBC,Lloyd’s, NAB, Natixis, Rabobank, RBS, Santander, Socié té Gé né rale, Standard
Chartered, UniCredit, US Bank
Banks that exclude project Jinancing for coal-related infrastructure:Cré dit Agricole, Cré dit Mutuel, Deutsche Bank, Helaba, Natixis, Rabobank, Socié téGé né rale
Banks that exclude corporate Jinancing for companies above a designated coal revenue
or coal power percentage (relative criteria):
ABN Amro, Barclays, BBVA, BNP Paribas (only coal mining), CaixaBank, Commerzbank(only coal power), Cré dit Agricole, Cré dit Mutuel, Danske Bank, JPMorgan Chase (onlycoal mining), KBC (only coal power), Natixis, RBS, Socié té Gé né rale, Swedbank, UBS(only coal power), UniCredit
Banks that exclude corporate Jinancing of companies above absolute coal production
and coal power thresholds:
Cré dit MutuelBanks that exclude corporate Jinancing for companies with coal expansion plans:
ABN Amro (only coal power), BNP Paribas (only coal power), Cré dit Agricole, Cré dit
Mutuel, Socié té Gé né rale (coupled with other criteria), UniCredit
Banks that have put an end-date on their support to the coal industry:
BNP Paribas (only coal power), Commonwealth Bank, Cré dit Agricole, Cré dit Mutuel, ING(only coal power), RBS, Socié té Gé né rale