Citigroup to stop financing coal projects – another nail into dirty coffin

Within days of SA President PW Botha’s infamous Rubicon Speech in 1985, American banks switched off the Apartheid Government’s lifeblood. The weekend after the globally televised address, Chase Manhattan chairman and CEO Willard C Butcher announced that not only would his company stop lending to South Africa, but it was also calling in all outstanding loans. Other banks followed and within weeks the country was forced to call a debt standstill, followed by five years of net capital repayments. The closing of its funding taps brought home the reality that Apartheid was unaffordable, sparking long overdue change. News that major US bank Citigroup is switching off lending to all coal projects might not have the same dramatic impact. But it’s certainly a reflection of a trend that’s developing momentum now that generating electricity through coal-fired plants is universally fingered as a major reason for global warming. Coal has been in trouble for a while. With project financing switching off, that’s escalating into a crisis. – Alec Hogg   

By Alex Nussbaum

(Bloomberg) — Citigroup Inc., the third-biggest U.S. bank, said it will cut back on financing for coal mining projects, in the latest blow to the industry that’s viewed as a key contributor to global warming.

Citigroup said its credit exposure to coal mining had “declined materially” since 2011 and that the trend would continue into the future. The policy applies to companies that use mountaintop removal methods as well as coal-focused subsidiaries of diversified mining companies, according to the New York-based company’s Environmental & Social Policy Framework guidelines posted online Monday.

Coal is loaded onto a truck at the Woestalleen colliery near Middleburg in Mpumalanga province, in this September 8, 2015 file photo. Shares in mining and trading company Glencore fell almost 30 percent and closed at a record low on Monday over concerns it is not doing enough to cut its debt to withstand a prolonged fall in global metals prices. About 3.5 billion pounds ($5.33 billion) in market value was wiped off the Swiss-based firm, whose $10 billion share offering in 2011 turned its managers into billionaire shareholders but left it saddled with debt - a growing problem as commodity prices fell. REUTERS/Siphiwe Sibeko/Files

“This new policy reflects our declining exposure and our continued commitment to managing environmental and social risks and opportunities,” Elizabeth Patella, a Citigroup spokeswoman, said in an e-mailed statement.

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Bank of America Corp. and Credit Agricole SA both previously said they were turning away from financing coal this year, as activists and policy makers zero in on the fuel as the biggest source of the emissions blamed for heating up the planet to dangerous levels. Almost 200 countries will meet in Paris starting next month to negotiate a global deal reining in fossil-fuel pollution. The U.S. issued rules this year to wean its power-generating industry off coal.

“Climate change is a global challenge of tremendous magnitude, and Citi is helping to accelerate the transition from a high-carbon to a low-carbon economy,” according to the guidelines. “Going forward, we commit to continue this trend of reducing our global credit exposure to coal mining companies.”

‘Major Momentum’

“With Bank of America, Credit Agricole, and now Citigroup withdrawing support for coal mining, this announcement shows major momentum away from financing coal by the banking sector,” said Lindsey Allen, executive director of the Rainforest Action Network, an advocacy group that has pressured banks to cut their support for the industry.

Read also: This is the future: New US energy Bill boosts solar, wind power, kills coal

Future approvals for coal projects will require “escalation and senior approval,” according to Citigroup’s new policy.

Other fuels that also produce greenhouse gases fared better under Citigroup’s framework. Oil-sands projects have risks that “need to be identified, mitigated and managed,” according to the guidelines, and the bank has “developed a risk-review process” for oil-sands clients.

The bank has a similar process for shale oil and gas, which must be “developed in a safe, transparent and environmentally and socially responsible manner,” according to the guidelines.

In February, the bank said it would lend, invest or facilitate deals worth $100 billion over the next decade to support renewable energy projects and other efforts to rein in climate change.