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January 24, 2011
Carbon Principles Fail to Reduce Financing of Coal
    by Robert Kropp

A study of the Carbon Principles by the Rainforest Action Network finds that the six signatory banks have continued to finance carbon-intensive projects while failing to increase investment in renewable energy.


In 2008, six of the largest banks in the US signed the Carbon Principles, which, according to a pres s release, was "the first time a group of banks has come together and consulted with power companies and environmental groups to develop a process for understanding carbon risk around power sector investments."

The six banks—Bank of America, Citi, Credit Suisse, JPMorganChase, Morgan Stanley, and Wells Fargo—agreed to promote energy efficiency in electricity consumption, encourage investment in renewable energy, and assess the risks associated with financing fossil fuel generation.

A new report by the
Rainforest Action Network (RAN), however, found that while the Carbon Principles may have imposed stricter due diligence conditions upon banks, they had no effect on the financing of carbon-intensive projects by the six signatories. Neither did the six banks increase their financing of renewable energy, the report found.

Entitled
The Principle Matter: Banks, Climate & The Carbon Principles, the report found that the six Carbon Principles banks "accounted for more than 55% of the $125 billion in loan and bond underwriting in the United States" to the electric utility sector, and that "a significant portion of this financing is to companies that are actively pursuing permitting for or construction of new coal-fired power plants in the US."

A case study cited in the report refers to a $4 billion financing of one of two coal-power plant to be built by American Municipal Power (AMP). When AMP expressed concerns to JPMorganChase over the impact of the Principles on the financing of the project, the bank replied, "(N)othing in the Principles prevents us from underwriting debt or providing financing for AMP-Ohio's projects or is intended to do so."

"While the broader economy has been shifting away from coal for myriad reasons, banks that have signed onto the Carbon Principles are continuing with business-as-usual in regards to coal and carbon," the report states.

Amanda Starbuck, Global Finance Campaign Director of RAN, said, "Have the Carbon Principles restricted financing to coal-fired power plants or encouraged greater levels of clean energy investments? Sadly, the answer is no."

According to the report, a more robust framework for financial institutions would include performance standards for transactions and engagement; the phasing out of support for both new and existing coal-fired power plants, as well as coal extraction and delivery projects; and a commitment to increased financing of renewable energy and energy efficiency projects.

"It is time leading financial institutions develop a more robust framework of policies and practices that concretely reduce emissions from electric power," Starbuck said.

 

 
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