Bank climate actions and their implications for the coal power sector

Abstract

Financial institutions around the world have announced halts to financing of coal-fired power plants (CFPPs). Non-profit and non-governmental organisations have financing, developed databases and reports that provide information on financial data and CFPP projects, as well as the quality of the coal policies of financial institutions. In this study, we integrated information from these databases and analysed the financing implications for CFPP development. We selected the world's 56 largest commercial banks and reviewed and mapped their coal policies according to four common financing conditions. We also analysed bank contributions via project and corporate finance, selecting Indonesia as a country-specific case study to examine how and to what extent banks have been supporting the coal industry. Our analysis revealed that banks have been financing the CFPP industry more substantially through corporate finance than project finance. Consequently, we suggest that the most effective financing policies consist of a combination of exclusion criteria that transparently address project and corporate financing and enhance bank positions by setting a coal phase-out target. Besides, more banks are offering sustainable finance, in which the budget committed to sustainability is larger than the amount historically financed for fossil fuels. Our findings conclude that commercial banks can potentially influence development of the coal power sector, even in a country like Indonesia where it is highly supported by public finance.

Keywords

• Coal financing
• Coal policy
• Project finance
• Corporate finance
• Coal power
• Indonesia