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Today, RAN, Sierra Club, and BankTrack launched our 2013 Coal Finance Report Card. This year’s report, entitled “Extreme Investments: U.S. Banks and the Coal Industry” evaluates the largest U.S. banks in terms of their financing of companies engaged in coal extraction, transport, and combustion.
As our title indicates, coal has become an extreme investment. Long touted as a cheap and abundant fuel, coal’s environmental and public health costs are becoming increasingly acute: A 2011 Harvard School of Public Health study found that coal mining and combustion in the U.S. imposes between a third to over one half of a trillion dollars in externalized environmental and health costs each year.
Despite mounting evidence of the extreme impacts of the coal industry on the climate and human health, in 2012, US bank financing practices have failed to address the acute risks and impacts of the financing the “worst of the worst” companies in the coal industry. Even as U.S. coal consumption for power generation fell 11 percent in 2012, the top three U.S. financiers of the coal industry (Bank of America, Citigroup, and JPMorgan Chase) collectively financed an estimated $9 billion for mountaintop removal mining companies and the most coal-intensive power utilities last year. The report card also finds that the broader banking sector remains deeply exposed to the coal industry, providing $20.8 billion in financing for these companies in 2012.
With few exceptions, bank lending and financing policies for the coal sector for this year’s report card received disappointingly low grades. Although Wells Fargo improved to a “C” for taking steps to improve its mountaintop removal mining lending practices and HSBC North America received a “C-“ for policies covering its lending to coal-fired power, grades for the rest of the U.S. banking sector showed almost no improvement from last year.
The long-term financial outlook for companies involved with coal mining, transportation, and combustion remains highly uncertain. As we note in one of our report’s case studies, Patriot Coal, a coal mining company with major MTR operations filed for bankruptcy last year and agreed to phase out its MTR operations. Of the 12 other MTR companies profiled in the report, only one had an S&P credit rating above ‘junk.’ Last month, investors scrapped a controversial plan to export coal through Coos Bay, Oregon. And on April 16th, the Texas power company Energy Future Holdings (formerly TXU) announced plans to file for bankruptcy due in part to the deteriorating financial picture for the company’s fleet of coal-fired power plants.
Last year, even with the coal industry’s bankruptcies, risky proposals for coal plant upgrades, and coal export terminals, Wall Street doubled down on its exposure to the industry, despite its incredibly uncertain future. Unfortunately, they’re not just gambling with their own money. Bad investments can be written off, but coal’s impacts on human health and the environment are severe, permanent, and irreversible.