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May 01, 2013
US Banks Continue to Finance Coal
    by Robert Kropp

Despite the coal industry's leading impact on climate change and the bankruptcies of several operators of coal-fired power plants, US banks continue to finance mountaintop removal and the construction of new plants.

The Rainforest Action Network (RAN), the Sierra Club, and BankTrack have released the fourth Coal Report Card, an annual analysis of the funding of mountaintop removal (MTR) and coal-fired power plants by US banks.

Each edition thus far has detailed how despite commitments made through the Equator Principles, whose signatories agree to bring the management of environmental and social risks to Project Finance transactions, US banks continue to provide billions of dollars in funding for the environmentally destructive coal industry.

Identifying Bank of America, Citigroup, and JPMorgan Chase as having financed $9 billion for MTR and coal-intensive power utilities in 2012, this year's report states, "The environmental policies and due diligence processes at these banks have had little measurable effect on their financing practices." Referring to the findings of a 2011 study by the Harvard School of Public Health, the report continues, "Coal mining and combustion in the US imposes between a third to over a half of a trillion dollars in externalized environmental and health costs each year."

Overall, US banks provided almost $21 billion in financing for the coal industry in 2012.

The lack of measurable improvement since last year's Coal Report Card seems even more inexplicable when one considers that coal power is increasingly viewed as an industry in decline. "In 2012, the coal industry struggled in the face of declining domestic coal demand," the report states.

For example, the report continues, "An equal-weighted stock portfolio of the 13 companies with MTR production profiled in this report would have lost 40% of its value between April 2012 and April 2013. As of April 2013, only one had a Standard & Poor's credit rating above 'junk'."

As for financing coal-powered power plants—several operators of which have declared bankruptcy, with more likely to follow—the report makes the following recommendations:
• Adopt meaningful carbon intensity or absolute carbon emissions targets for new power plant finance;
• commit to disclosing greenhouse gas (GHG) emissions from bank lending and underwriting portfolios:
• reduce financed emissions from lending and underwriting by 20% by 2020;
• expand due diligence processes; and
• engage with power sector clients on climate risk.

"Rather than clinging to a shrinking industry until the bitter end, US banks should follow the lead of their European counterparts by planning ahead for a carbon-constrained future and seeking new opportunities in low-carbon energy sources," the report concludes.


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