Climate change: China trails global financial firms in committing to end investments in coal projects, study shows

The number of financial institutions globally that have committed to coal divestments has doubled in the past three years, but it remains negligible in China, according to a new study.

While more than 200 “globally significant” companies now have formal policies restricting investment in coal mining or coal-fired power projects, just three financial institutions from China have established a formal coal policy, the Institute for Energy Economics and Financial Analysis (IEEFA) said in its “200 and Counting: Global Financial Institutions are Exiting Coal” report on Thursday.

It took almost six years until 2019 for the first 100 institutions, including banks, insurance companies, asset managers, pension funds, export credit agencies and multilateral development banks, to adopt coal exclusion policies, but since then the number has doubled in just over three years, the Ohio-based independent think tank said.

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“Institutions are getting tougher on what they will finance, and they have identified coal as a risky investment,” Christina Ng, the IEEFA’s debt markets leader for Asia-Pacific, said in a statement. “They see climate risk as a financial risk.”

Companies across the world are aligning their lending to goals to reduce carbon emissions and reach net zero to contain global warming and avoid catastrophic consequences of climate change.

However, companies continue to inject funds into fossil-fuel projects. Two-thirds of fossil fuel investments identified by the Germany-based non-profit Urgewald, or US$2.13 trillion, were in oil and gas companies, according to research from its Investing in Climate Chaos website published on April 20.

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Around one-third, or US$1.05 trillion, was in companies on the organisation’s Global Coal Exit List, consisting of over 1,000 companies and their subsidiaries that were operating along the thermal coal value chain. Some 38 per cent of total coal investments identified by Urgewald went to companies that were still building new coal power plants, mines or coal infrastructure.

Bank of China, one of China’s big four state-owned banks with assets of over US$4.2 trillion, introduced its coal exit policy in September 2021. The bank said it would no longer provide financing for new coal mining and new coal power projects overseas from the fourth quarter of 2021, except for projects already signed.

Ping An Bank, with assets of over US$774 billion, has also committed to not build any new coal-fired power projects abroad, but the IEEFA report said it was a “very weak coal policy”.

“Both these FIs [financial institutions] have not committed to any exclusion policies in relation to several coal assets within China,” the IEEFA said. “Although we have listed both of these FIs in our coal exit list, we will monitor them closely to see if they extend their policies to cover coal assets within China.”

However, the Beijing-based Asian Infrastructure Investment Bank (AIIB) has a relatively strong formal coal policy, according to the report. The AIIB announced its first coal exit policy in 2017 and upgraded it in November, when it committed not to finance any coal-fired power plants and projects “that are functionally related to coal”.

“Overall, China, the second-largest economy in the world, has too few FIs with coal exit policies,” the IEEFA report said.

Other major banks such as Industrial and Commercial Bank of China (ICBC), with assets over US$5.52 trillion, and China Construction Bank (CCB), with assets over US$4.75 trillion, also do not have formal coal divestment policies, according to the report.

Bank of China, ICBC, CCB and Ping An Bank did not immediately respond to the Post’s requests for comment.

“AIIB has not financed any coal projects in past, is not financing any coal projects now, and won’t be financing any coal projects in the future,” a spokesman said.

Meanwhile, Europe leads the way with the highest number of financial institutions divesting from coal, at 114, according to the report. The region also has stricter exclusion policies compared with other regions.

Financial institutions with coal exclusion policies in Asia increased from 10 in April 2019 to 41 over the next three years.

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