The revolution against coal won't be televised... at least if the banking sector has anything to do with it.
The Net Zero Asset Managers initiative that was launched in December 2020 features signatures from 236 organizations with the goal of reducing greenhouse gas emissions to zero by 2050 or sooner.
Signatories include asset manager like BlackRock (BLK).
Such a noble endeavor on the front end may be undermined by the business reality that coal is still one of the world's top natural resources, providing about a third of the United States' energy.
Commercial banks funneled over $1.5 trillion into the coal industry between January 2019 and November 2021, according to joint research from 28 non-government organizations.
“It’s long been known that the coal industry is the number one driver of our planet’s rising temperature. But who is providing the loans, the underwriting services and the investments that allow these companies to keep on operating?" said Katrin Ganswindt, head of financial research at Urgewald.
Citigroup did not return a request for comment in time for publication.
Banking Industry Funding Climate Change
Institutional investors identified by the NGOs put over $1.2 trillion into the coal industry over a two year period.
Over the same period, while 376 commercial banks provided $363 billion in loans to the industry, just 12 banks accounted for 48% of that total.
The top-5 lenders of those 12 included three Japanese banks, Mizuho Financial (MFG), Mitsubishi UFJ Financial (MUFG) and SMB Group. Barclays (BCS) from the U.K. and Citigroup (C) from the U.S. were also top lenders.
Banks from only 6 countries - China, the U.S., Japan, India, the U.K. and Canada - were responsible for 86% of overall bank financing for the coal industry.
Overall, the research shows that a small number of financial institutions from just a handful of countries are propping up the coal industry with just two dozen investors accounting for 46% of institutional investments in coal companies.
ESG Investing in the Age of Coal
Investments in sustainable companies worldwide stood at $8 trillion late last year, according to a report from Broadridge Financial Solutions.
From January through September 2021, investors poured $577 billion into mutual funds and exchange traded funds dedicated to environmental, sustainable and governance, exceeding the $355 billion full-year total from 2020.
But while retail investors are increasing their holdings of green energy companies, institutional investors are pouring even more money into pollutants.
BlackRock, which did not immediately return a request for comment, is the top investor in coal developers with investments of over $34 billion in the industry, according to the NGOs, despite its Net Zero pledges.
“Despite the flood of net zero alliances and climate ambition statements by financial institutions during COP26, the vast majority of investors are still failing to do the obvious: End their support for coal developers," Yann Louvel of Reclaim Finance said.
Nearly 40%, $469 billion, of the $1.2 trillion invested has been in companies developing new coal assets.
For example, the coal plant developers in BlackRock's portfolio are planning to build over 200 GW of new coal-fired capacity. This amount is equivalent to the coal plants fleets of Russia, Japan, Indonesia, Poland and Germany combined.
How investing in new coal plants will help the globe get to net zero emissions is not clear, especially two years after BlackRock vowed to divest from thermal coal.
Institutional investors seem to be weighing the benefits of the good press they get from claiming to go green against the actual profits from coal powered energy.
Coal is still winning, according to Tuesday's report, even as Larry Fink publicly says that "When we harness the power of both the public and private sectors, we can achieve truly incredible things. This is what we must do to get to net zero."
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