Earlier today, Citigroup, the parent company of Citibank, committed to take a significant, though partial step away from banking coal. The company updated its environmental policy statement, stating that it had begun to cut its credit exposure to coal mining and that “going forward, we commit to continue this trend of reducing our global credit exposure to coal mining companies.” This policy change makes Citigroup the third global bank to commit to broad industry-wide cuts to coal mining finance this year, and the first to do so since the launch of the global Paris Pledge calling on banks to end financing for coal mining and coal-fired power.
Overall, the policy change is a positive one, signaling that Citigroup is moving away from lending to an industry that is incompatible with a low-carbon future and a major contributor to climate change. However, Citigroup’s policy change leaves some major loopholes and unanswered questions:
- It is incomplete, covering only part of Citigroup’s banking relationships with coal mining companies – This commitment to reduce its “credit exposure” commits Citigroup to reduce corporate lending to coal companies, but not the bank’s continued involvement with the industry through issuing bonds and shares. This leaves a big loophole for the bank to continue to underwrite new debt and equity for coal mining companies.
- It lacks a clear timeline and phase-out commitment – Although the bank states that it has already begun to reduce its exposure to coal mining, reducing exposure is not the same as ending it. RAN will be monitoring the bank’s participation in transactions with coal mining companies closely to assess how this commitment is moving the bank towards phasing out its lending involvement with coal mining altogether.
- It does not address the bank’s financing relationships with coal-fired power – Last year, Citigroup financed $2.5 billion for the largest operators of coal power plants in the world. The bank’s policy change is silent on these transactions, a key gap, especially after Crédit Agricole announced significant cuts to coal power financing last week.
With less than two months before the Paris climate conference, we’re long past the time for incremental steps away from coal. It’s time for banks to stop financing it, period. As Anote Tong, President of the low-lying island nation of Kiribati wrote in August, the development of new coal mines “undermines the spirit and intent of any agreement we may reach…To avoid catastrophic climate change, we must leave the vast bulk of carbon reserves in the ground.”
Bottom line, time is running out for Citigroup’s competitors on Wall Street, including Morgan Stanley, to get on the right side of history on climate and coal by cutting ties to coal mining and coal-fired power.