Among the 638 banks examined, a mere 140, approximately one-fifth of the total, outstandingly reduced their involvement in the coal sector since 2016, reveals a report by a German NGO and partner organizations.
Contrarily, the study found that investments in coal increased for 75 banks during the same period. Urgewald, the NGO leading the research, underscored that commercial banks’ reduction in coal financing is not keeping pace with the urgency required to meet the Paris climate goal of limiting global warming to 1.5 degrees Celsius above preindustrial levels.
Research shows how banks, investors finance the coal (Credits: CNBC)
Katrin Ganswindt, Urgewald’s finance lead, emphasized the necessity for stricter regulations in this domain, stating, “Without an end to coal financing, it is difficult to imagine that we can get out of coal in time.”
In 2023, banks continued to finance the coal industry remarkably, amounting to $136 billion, a mere 20 percent reduction from 2016 levels. The bulk of this financing, over 90 percent, originated from institutions in China, the United States, Japan, Canada, India, Britain, and Indonesia.
Particularly alarming is the 22 percent increase in U.S. banks’ investments in coal between 2021 and 2023, reaching $19.8 billion, as highlighted by Urgewald. Meanwhile, European banks managed to slash their coal investments by 51 percent during the same period, totaling $6.5 billion.
Coal mining (Credits: Context News)
This report surfaces following the G7 developed economies’ ministers’ agreement on a timeline to phase out coal-fired power plants. The representatives from the United States, Canada, France, Italy, Germany, Britain, and Japan committed to ending coal usage by the mid-2030s.
In Europe, banks face mounting pressure from both investors and supervisors to divest from environmentally damaging sectors. In January, the European Central Bank cautioned that most banks under its oversight had yet to align their portfolios with the Paris Agreement targets, leaving them vulnerable to heightened climate risks.
