British banks’ financial support for companies involved in the coal industry has risen since the 2015 Paris agreement, despite their pledges to wind down financing for a sector seen as a significant obstacle to tackling global heating.
UK lenders provided loans and underwriting services worth $30.3bn (£21.9bn) to companies that sold or burned coal, or provided coal industry services, during 2019, the latest year for which complete data is available, according to research by the campaign groups Reclaim Finance and Urgewald. That represented a significant increase compared with $21.5bn in financing provided in 2016.
Barclays was by far the biggest UK provider of finance to companies in the coal industry, followed by HSBC and Standard Chartered, the research found.
Burning coal produces more carbon dioxide emissions than other fossil fuels, including oil and natural gas, and phasing it out rapidly is widely seen as a key part of ending the climate crisis.
However, campaigners have criticised the banks and other financial firms such as insurers and asset managers whose phase-out plans allow them to continue profiting from coal for years.
The UK is the world’s third-largest lender to coal industry companies, behind only the US and Japan. The finding comes as the UK prepares to host UN Cop26 climate talks in November. Under the Paris climate accord, 189 countries agreed to limit global heating to well below 2C, the scientifically advised limit of safety.
Lucie Pinson, Reclaim Finance’s executive director, said: “The City of London isn’t lifting a finger to end its deadly coal addiction, even if that means wrecking the UK’s reputation on climate. On the international stage the UK government has sought to lead a global exit from coal, but the financial sector clearly hasn’t got the memo.”
Barclays provided loans and underwriting (the purchase and resale of debt or shares for companies raising money) worth $17.5bn in 2019 for companies on the global coal exit list, a database of companies with significant coal-related earnings. This included finance for the FTSE 100 mining company Glencore and the Finnish and US energy companies Fortum and Duke Energy, the report says.
HSBC gave $6.5bn in financing in 2019 to companies with coal interests. It has previously financed companies including Indonesia’s PLN and South Korea’s Kepco. Standard Chartered provided services worth $4.6bn in 2019, and has funded India’s Adani and Power Finance Corp, as well as South Korea’s Posco.
Between January and October 2020 those three banks provided another $19.2bn in coal financing – the same amount as in the whole of 2016.
The data comes as investors increasingly pressure banks to improve their record on climate issues. On Wednesday Barclays will face its second consecutive shareholder climate vote on a resolution urging it to phase out services to coal, oil and gas companies.
Market Forces, the environmental group that organised the shareholder resolution, claims the bank still has not proved that its work with polluting firms is aligned with Paris climate goals.
Barclays says it adopted its climate policy last year, claiming it can reach net zero emissions targets without universally phasing out fossil fuel clients, and instead helping them transition to greener business models.
A group of 16 influential investment firms – including Amundi, Man Group and government-backed pension scheme Nest – wrote to the Barclays chief executive, Jes Staley, last week, pushing him to tighten its policies. However, it is understood that some of the investors are likely to give Barclays more time to implement existing pledges before applying further pressure.
Barclays said: “The board continues to believe that Barclays can make the greatest difference by supporting the transition to a low carbon economy, rather than by simply phasing out support for some of the clients who are most engaged in it.”
The bank said the majority of the coal financing covered by the research happened before it started aligning its work with the Paris agreement in March 2020. It will gradually limit financing to companies that obtain significant coal revenues.
Barclays, HSBC and Standard Chartered said they did not provide direct financing to new coal projects, although that did not take into account financing for conglomerates with more diverse businesses.
HSBC said it would publish a plan by the end of the year to phase out financing for coal-fired power projects or thermal coalmines in wealthier countries by 2030. A spokesperson for HSBC said the bank would help clients “progressively decarbonise” but that it would also aim to “maintain economic stability”.
A Standard Chartered spokesperson said the company had “made major strides in our coal policy over the past few years” and it would continue to review its position.