Growing number of financial and insurance institutions are switching from coal to renewable investments, IEEFA
Post date: 15/05/2019 - 17:21
Five major financial institutions recently announced plans to move away from financing coal-fired power plants. According to the Institute for Energy Economics and Financial Analysis (IEEFA), Singapore’s big three banks – DBS Group Holdings (DBS), United Overseas Bank (UOB) and the Oversea-Chinese Banking Corporation (OCBC), Southeast Asia’s second-largest lender -, have each announced ending financing for new coal-fired power plants. »This builds on ground-breaking moves by State Development & Investment Corporation (SDIC), the first major domestic Chinese financial institution to completely exit the coal industry in March 2019, and Japan’s Mitsubishi UFJ Financial Group (MUFG), the biggest bank in the world outside China, that announced a coal exit in April 2019,« says the organization. The recent Asian financial exodus »highlights growing regional concerns over the increasing risks of stranded assets and environmental costs in the thermal coal power industry.«
The Government of India is moving the country away from a reliance on imported coal. Tata Power, the largest private integrated power company, is now one of India’s leading renewable energy investors, »underpinning the electricity sector transition through its recent withdrawal from building new coal-fired power plants.«
Over the past six months, leading Japanese trading houses (Marubeni, Sojitz Corp., ITOCHU, Mitsui and Mitsubishi) have stated they will no longer own, nor invest in new thermal coal capacity. Japanese financial institutions like Sumitomo Mitsui Trust Bank, Nippon Life Insurance, Dai-Ichi Life Insurance and MUFG are also »rapidly re-assessing their business models, with partial coal exits and/or restrictions«, says IEEFA. Environment Minister Yoshiaki Harada released a policy initiative in March 2019 stating that the Ministry will no longer sanction the construction of new thermal coal plant facilities nor upgrade existing ones.
South Korea announced a new draft energy master plan that increases the nation’s ambition to move away from coal and nuclear towards renewable energy and gas. China, the world’s biggest importer, producer and consumer of thermal coal, has yet to act to limit the financing and building of new coal-fired power plants, but SDIC Bank’s signals to exit coal investments which »may indicate a change in the country’s strategic direction going forward.« Thailand updated its power development plan 2018-2037 halving their target for coal to just 12 percent by 2037, down from the previous 25 percent by 2036 target.
In February, IEEFA reported, that over 100 global financial institutions are exiting coal, holding more than $10 billion worth of assets under management. In May, the consultancy counted a total of 112 global financial institutions having announced a coal exit: »Every week in 2019 at least one globally significant financial institution has announced an exit from thermal coal.«
Furthermore, two leading European insurers, UNIQA of Austria and MAPFRE of Spain, and one French asset manager, BNP Paribas of France, brought in new restrictions on thermal coal financing, insurance and/or investments during March 2019. In April 2019, Australia’s QBE Insurance announced the cessation of investment in and insurance for thermal coal projects; Switzerland’s UBS announced an updated coal power exit policy; Norway’s Government Pension Fund Global confirmed it will now invest in unlisted renewable energy infrastructure; and major German insurer Hannover Re announced a scaling back of its thermal coal exposure over the long term.
According to IEEFA findings, »the global financial industry is continuing its capital flight from thermal coal and the coal power sector.«