Some of the world’s biggest banks are showing a strong trend away from fossil fuel investment, as Citigroup becomes the most recent financial giant to join the anti-coal movement. This week, the American owned corporation announced plans to slash investments and lending to the coal mining industry as part of a move towards carbon reduction.
Citibank joins fellow major financial institutions, like Bank of America and Crédit Agricole, in a pledge to reduce financial support for any future projects of international coal companies.
The Citibank divestment strategy will be implemented in the form of restrictions on approvals for credit lines and investments, requiring senior approval to meet a set of strict ethical and human rights focused guidelines.
In an environmental practices memo released earlier this year, Citibank stated that they will “commit to continue the trend of reducing our global credit exposure to coal mining companies.”
Coal Is Bad for the Planet, But It’s Also Bad for Business
The fossil fuel sector in the US has been under a great deal of financial pressure in recent years, as investment falls and carbon reduction and climate action is on the rise.
Following strong action from financial institutions to target polluting and unethical industries, the US coal industry has seen borrowing costs rise from 8 percent to 65 percent in just six months.
The cracks are beginning to show in the fossil fuel industry with companies being impacted to the point of financial failure. Alpha Natural Resources, the second biggest coal company in the US, filed for bankruptcy in August this year.
This company is part of the 26 percent of US coal companies going out of business in the past three years, with the value of surviving companies dropping by 76 percent in the past five years.
While the move is targeting the ethics of pollution and environmental degradation, they are further justified by economic rationale as investment in coal is becoming more unstable as the anti-coal movement grows.
This gives big banks every reason to limit their exposure to financial risk and invest in more stable and thriving economies such as the booming renewable energy sector.
Could Finance Save The Planet?
In the lead up to the United Nations Climate Change Conference in Paris in December, the issue remains that nations, and subsequently their business sectors are operating on a voluntary, unilateral pledge system, the Intended Nationally Determined Contributions.
While any action against climate change is seen as a step in the right direction, climate advocates are stressing that time on against us and more must be done if we are to combat the global issue.
The finance sector is at the forefront of many experts focus, due to the power and influence it has over every global industry.
Not only is divestment in carbon-rich resources central to the success of a an effective carbon reduction strategy, investment from the finance sector into proactive low-carbon economies is essential to achieve climate action goals.
Green investment is currently only 15 percent of the total global investment in energy supply. Climate scientists are saying that this is inadequate progress in terms of combating temperature rises in the future.
The finance sector has been singled out as the most powerful tool for change in global climate action, meaning moves by big business such as Citigroup are promising signs of the future of energy investment.
Photo credit of Emilian Robert Vicol