Wall St. & Climate Change

gfc_carbonprinciplesbanner_600x450.pngOver the past century, the Big Banks have accrued untold power only to use it to repeatedly drive the world’s economy to the brink of collapse. Now the biggest banks are threatening to take us to the edge of an ecological catastrophe if they don’t stop funding coal, the primary driver of climate change.

A bank stands behind almost every utility burning coal and every mining company razing the land. The mounting climate crisis demands that these institutions should not invest even one more dollar in coal. Over the past few years, the banking sector has come together on a several occasions to issue various sets of principles to help it move away from coal, only to find itself still unable to extricate itself from the coal industry for good.

Putting Banks On Notice

RAN is pushing the banking sector to cut financing to new and existing coal plants, extraction and infrastructure, as well as emphasizing the benefits of increasing funding to clean energy projects such as wind and solar. These technologies are ready right now to power our lives; all that we lack is the political will to make our clean energy future a reality.

In the next few years, cutting financing to key coal projects, and ending the projects themselves, will not only mean real and immediate reduction of polluting carbon emissions, but will also send a signal throughout the industry that King Coal’s days are numbered.

We have put the largest U.S. banks ‘on notice’ with the following demands:

  • No financing for companies pursuing new coal-fired power plants and life-extending retrofits of existing coal-fired power plants.
  • No financing for companies engaged in mountaintop removal coal mining.
  • No financing for companies pursuing coal export infrastructure.
  • Shift the balance of your energy financing to support power generation that is less threatening to our health and environment.

Banks and Coal: The Carbon Principles

In 2008, three leading banks, Citi, JP Morgan Chase, and Morgan Stanley, announced a common coal power financing policy, known as the Carbon Principles. Wells Fargo, Bank of America, and Credit Swiss later joined them. According to the bank proponents, The Carbon Principles represented the first time “that financial institutions, advised by their clients and environmental advocacy groups, have jointly committed to advance a consistent approach to the issue of climate change in the US electric power industry.”

In hindsight, the Principles don’t stand for much at all. The banks comprise six of the top seven ranked banks in Bloomberg League Tables for underwriting and loans in the electric utility sector in the U.S. They also accounted for more than 55% of the $125 billion in loan and bond underwriting in the United States to the coal sector from the beginning of the Carbon Principles implementation date of August 4, 2008 through June 30, 2010.

In 2011, RAN evaluated the Carbon Principles and discovered that they have had almost no effect on the banking sector.

Banks and Coal: Beyond the Carbon Principles

Several other policies have emerged since the Carbon Principles that offer a more comprehensive approach to addressing climate change from both a frame of ecological and social responsibility, as well as addressing the economic risk posed by carbon-intensive investments.

The Equator Principles, which were created in 2003 to address “social and environmental risk in project financing,” and have since been signed by over 65 international banks. The Equator Principles are limited only to project finance specific financing arrangements, while the Carbon Principles are a framework looking at transactions that include corporate financing, bond issuance, and even advisory services.

The Climate Principles are a similar industry-wide framework, created in December 2008 by primarily European and international banks including Credit Agricole, HSBC, Munich Re, Standard Chartered, and Swiss RE. While similar to the Carbon Principles in terms of incorporating a risk analysis regarding carbon and climate into their due diligence protocols, the Climate Principles look more broadly at carbon-intensive aspects of their operations, clients, and transactions rather than only looking at coal-fired power plants. They also go beyond concern for immediate risk in a transaction, and also seek to address greenhouse gas impacts of their supply chain while explicitly acknowledging the urgency of the climate crisis and the need for collective societal action.

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