One after another, the big banks have rolled out new policies that limit the business they can do with the coal industry. In the last six months alone, nine banks have announced coal-financing restrictions.
They have a long way to go: Between 2009 and 2014, the world's largest banks provided $257 billion in financing to the coal industry, newly compiled data show. Look closely at the new coal policies, and you'll see the banks aren't rushing to change that.
"The biggest banks in the U.S. and Europe are also the world's biggest coal banks," the authors of the new report write. Those institutions are still on course to do billions more in business with the coal industry because their new policies are narrowly focused on especially noxious or already moribund sectors of the coal industry in the developed world, while failing to address the continued expansion of coal mining and coal-fired power plants in the developing world.
For instance, Barclays, Bank of America, Citigroup, Credit Suisse, Morgan Stanley, JPMorgan Chase and Wells Fargo have each distanced themselves from or cut direct ties to mountaintop removal mining, a particularly destructive and visually shocking form of coal mining. But mountaintop removal is hardly the only way to extract coal in the U.S. or abroad. Other techniques have destroyed entire islands in Southeast Asia, but they aren't directly addressed by the banks' policies.
Another example comes from Morgan Stanley, which this week said it would stop financing new coal-fired power plants in the developed world. That should be easy: Due to regulation and activism, the construction of new coal-fired power plants in the U.S. and the rest of the developed world has slowed to a crawl.
Citigroup, Morgan Stanley, Wells Fargo and others have also pledged to reduce their lending to the coal industry overall. But the U.S. coal industry has been an economic disaster for more than a year -- companies bet badly on huge new demand from China, and high-profile bankruptcies and soaring lending costs have followed. Reducing funding for an industry in financial decline is what bankers do, purely from a balance sheet perspective. And as more and more U.S. coal companies go out of business, there are simply fewer firms to lend money to.
In the developing world, where the coal industry is still growing, banks continue to finance that expansion. They also continue to finance utilities in the developed world that have huge fleets of already operating coal-fired power plants, so long as the additional money isn't "for a new coal-fired power plant."
This is not surprising: Big banks finance the global economy, and the global economy burns a lots of coal.
The huge reduction in coal-fired power plants in the U.S., however, shows a way to change that brutal logic. Banks have chosen to pull back where the coal industry is acting egregiously or failing economically. That means that the more the divestment movement, which has attracted over 500 institutional investors, can make coal morally objectionable and the more alternative sources of power can demonstrate their viability, the more likely it is that the financiers will walk away.
In the end, banks' relationship to coal reverses the famous adage in "Field of Dreams": If you don't build it, they won't come with financing.