American institutional investors are responsible for most of the international investments in the overseas coal industry, shows Energy Monitor’s Weekly data based on research from German non-profit environmental and human rights group Urgewald.
China is the largest public financier of coal plants across the world. The top ten underwriters of the global coal industry are all Chinese financial institutions such as the Industrial and Commercial Bank of China, and the Bank of China.
Yet, global coal financing is sustained by a myriad of actors outside of China. There is only one Chinese institution in the top ten lenders to coal projects and eight out of the top ten investors are American institutional investors. Investment management companies such as Vanguard, BlackRock and Capital Group lead with a combined investment of more than $208bn in coal projects around the world.
Overall, 87% of total – public and private combined – financing for overseas coal projects comes from non-Chinese entities. While the G7 has pledged to end international public financing of coal by the end of 2021, it will remain challenging to meet climate targets if large institutional investors do not divest.
According to Boston University Global Development Policy Center, public finance only accounts for 3.4% of the capital behind the global coal fleet outside of the G7 and China. In other words, the private sector is the engine behind coal plants in much of the world.
Considerable shifts in investment patterns are crucial in all scenarios that seek to limit global warming to 1.5°C, says the Intergovernmental Panel on Climate Change in its Sixth Assessment Report launched earlier this year. In particular, investments in coal need to stop by 2030. Investment portfolios are not aligned with the emissions reduction goals needed to keep global warming at bay. If there is to be a genuine coal phase-out, divestment will have to happen much faster.