The annual Coal Finance Report Card – released by the Rainforest Action Network, Sierra Club and BankTrack – evaluates the largest US banks based on their financing of coal.
“Coal has become an extreme investment,” the report’s introduction said.
“The extraction and combustion of coal impose immense human and environmental costs, and the economic viability of coal-fired power in a carbon-constrained future is increasingly uncertain.”
Bank of America topped the report’s list as the biggest bankroller of coal-fired power plants and mountaintop removal mining. The bank financed a total $3.03 billion last year. This was followed by Citigroup and JPMorgan Chase financing $2.75 billion and $2.17 billion respectively in loan and underwriting transactions.
Together, US banks financed a combined $20.8 billion in coal companies, according to the report.
The report, Extreme Investments: US banks and the coal industry, also graded banks on the transparency of their investment practices and commitment to get out of the coal game. Bank of America scored the highest grade, a “C”, on mountain-top removal and a “D” for coal-fired power plants.
The bank recently met its goal of $20 billion worth of financing activities in areas such as solar and wind power, energy efficiency and hybrid cars, and it has now set a new goal of an additional $50 billion over the next 10 years.
While these investments remain considerable, they have decreased a great deal in the past few years. The top three banks investments fell 50%, 54% and 64% respectively in 2012 from the previous year, with the report citing weak industry data to explain why.
National coal production fell 7.3% in 2012, consumption dropped 11.3% and transportation dropped 11%.
The report also said mountaintop removal mining was a particularly risky investment.
“Coal companies that engage in MTR face acute legal, regulatory, and reputational risks. In 2012, the coal industry struggled in the face of declining domestic coal demand. As a result, several of the largest coal companies that have MTR operations saw their credit ratings fall and their stock prices slide,” the report said.
“An equal-weighted stock portfolio of the 13 companies with MTR production profiled in this report would have lost 40% of its value between April 2012 and April 2013. As of April 2013, only one had a Standard & Poor’s credit rating above “junk.””
Bank of America spokeswoman Britney Sheehan told Quartz that despite environmental groups encouraging banks to divest from coal companies, it wasn’t a realistic request.
“Walking away from coal sounds easy, but it won’t solve the issue of climate change because it is not realistic,” Sheehan told Quartz.
“Coal comprises more than 30% of the energy used to generate electricity, and there are other fossil fuels that are cheap, abundant and providing a growing share of our energy needs. The fact is that fossil fuels, including coal, will be with us for many years, which is why Bank of America’s policy is focused on engagement with the energy sector on technology addressing the impacts of all energy sources, including coal and other fossil fuels, while being wholly committed to playing an expanding role in financing renewable and other forms of low-carbon energy over the long-term.
“We can’t just turn off the funding for a significant part of our electricity mix overnight,” Sheehan said.
“But more importantly, does society really want financial institutions making decisions on what fuels are used to power our country? Energy from wind and solar continue to grow, but supply only a small portion of our energy needs. That will continue to be the case over the short to medium term.”
