A new coal report out today finds that despite growing risk, major banks continue to pump billions into the global coal industry. However, there are growing signs that coal is falling out of grace with major lenders.
The report, The End of Coal [pdf] was published by the Rainforest Action Network, BankTrack and the Sierra Club. The groups found that, in 2014, global banks financed close to $70 billion in coal mining operations. — up from $55 billion the previous year.
However, the report also finds that coal is starting to lose out, with a critical mass of banks in 2014 refusing to finance environmentally destructive coal projects like the proposed mine in Australia’s Galilee Basin. In the case of the Galilee Basin eleven major international lenders have stated they would not finance the project, including the major French investment banks BNP Paribas, Credit Agricole and Societe General.
The five largest lenders to the global coal mining sector in 2014 were all China-based:
- Industrial Bank (China)
- Bank of China
- China Everbright Bank
- China Construction Bank
- Agriculture Bank of China
These 5 companies alone underwrote $26.5 billion worth of coal mining projects.
This pace of investment will likely soften over the coming years as China’s consumption of coal begins to flatline and governments continue to impose new pollution regulations on the sector and a price on carbon gains more support.
Earlier this year, China Shenhua Energy Co., one of China’s largest coal companies, projected commercial coal production to fall over 10% in 2015. This follows on a 2.5% reduction in coal production in China for 2014.
In the United States, major coal companies like St. Louis-based Peabody Energy have seen their stock price crash over the last few years.
Peabody (NYSE: BTU), which was trading as high as $72 per share in mid-2011 is trading today at less than $5.
Other major US coal companies are also feeling the pinch, like Alpha Natural Resources (NYSE: ANR) and Arch Coal (NYSE: ACI). Both are currenly trading below $1 per share.