According to the Coal Policy Tool, our tracking device for coal policies, nearly 300 global financial institutions now have policies limiting financial services to the coal sector. The problem is not the number of policies, but rather, their quality.
Firstly, too many of these policies still enable support for coal expansion. When policies exclude coal companies, they do it based on how much coal they produce or coal power they generate, but not on the basis of their future plans. This is a major loophole given that more than 500 companies are currently planning new coal projects worldwide, all incompatible with a 1.5°C carbon budget and breathable air.
Despite calls at COP26 to accelerate the coal phase out, none of the net zero alliances gathering banks, asset owners, insurers and asset managers require that their members stop supporting new coal. Our analysis shows that after COP26, the vast majority of the members of the Glasgow Financial Alliance for Net Zero (GFANZ) covered in the Coal Policy Tool still do not restrict support to coal developers.
Secondly, even when financial institutions adopt the right criteria to exclude coal giants and developers from their portfolio, many don’t apply them to all their activities. An iconic example of double-standard is how most asset managers apply their coal restriction policies to their “active’ investments but not to the growing share of “passive” investments. Quite hypocritical right?
Fortunately, some financial institutions are setting an example: there are now more than 30 players with robust coal policies and listed as best practices in the Coal Policy Tool.