JPMorgan Backs Away From Investing In Coal, Compares It To Child Labor
Multinational banking and financial services company JPMorgan Chase has backed away from investing in new coal mining projects.
Joining a growing list of companies and banks to step away from investing in fossil fuels, specifically the struggling coal industry. JPMorgan Chase published the latest version of its Environmental and Social Policy Framework (PDF). The Framework serves to acknowledge how the company’s “business decisions have the potential to impact surrounding communities and the environment.” JPMorgan Chase first adopted an Environmental and Social Risk Policy in 2005, which was then updated in December 2013.
JPMorgan Chase’s revised Framework has added coal to its list of Prohibited Transactions, alongside such other transactions as Forced or Child Labor, and Illegal Logging. Specifically, JPMorgan will no longer finance “Transactions that involve asset-specific financing where the proceeds will be used to develop a new greenfield coal mine or a new coal-fired power plant in a high income OECD country.”
“We believe the financial services sector has an important role to play as governments implement policies to combat climate change, and that the trends toward more sustainable, low-carbon economies represent growing business opportunities,” JPMorgan said in the Framework. As with many companies and institutions that have begun moving away from investing in coal, JPMorgan nevertheless reaffirmed its commitment to the role “of coal as an energy source” as “an important part of the energy mix” for the foreseeable future, providing “financial support to those clients whose activities remain consistent with our own internal policies”.
This is a relatively common practice and statement, however, and JPMorgan should nevertheless be credited for the steps they are taking. Specifically, JPMorgan will no longer provide project financing or other forms of asset-specific financing to the development of greenfield coal mines.
Additionally, JPMorgan will be reducing its “credit exposure to companies deriving the majority of their revenues from the extraction and sale of coal.” As such, JPMorgan “will apply enhanced due diligence to transactions with diversified mining and industrial companies where proceeds will be used to finance new coal production capacity.” JPMorgan will also continue to reduce its exposure to companies engaged in mountaintop mining.
The announcement comes at the same time as several stories have revealed the downward trend of the global coal industry. Chinese coal consumption dropped again in 2015, down 3.7%, in the face of massive increases in solar and wind energy capacity. The US Energy Information Administration (EIA) posted new figures this month which showed that coal made up more than 80% of retired electricity capacity in the US in 2015, totaling nearly 14 GW. The EIA has already published figures earlier this year showing that US coal production had fallen to its lowest levels since 1986, dropping 10% in 2015 as part of a much larger downward trend. US President Barack Obama made matters worse for the coal industry, halting new coal leasing while the Department of the Interior launches a comprehensive review of the federal coal program.
On top of it all, just this week, China’s Guizhou province, the country’s largest coal-producing province, located in the south of China, announced that it aims to close 510 coal mines in the next 3 to 5 years, cutting coal production capacity by 70 million tonnes. Since 2013, Guizhou has already cut its operational and under-construction coal mines by over 900, and is planning to close 80 coal mines in 2016.
China’s National Energy Administration is planning to close over a thousand coal mines in 2016, which is going to have major impacts to all of China’s coal exporters, including the US.
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The pace at which China is backing away from coal is quite amazing and heartening. Just recently we had been hearing about how quickly they were opening up new coal plants. Apparently one of the few advantages of a such a strong government is that things can change rapidly when driven from the top down. Thankfully this is a great change being driven.
Yes. The Chinese central committees are doing very good things for the world at the moment. Good for them. I honestly wouldn’t have expected it.
Few predicted it. China could hide its pollution from the world at the olympics, but it could not quell public unrest over its blackened, unhealthy skies.
Not only are new coal plants being opened to run at a loss: this reflects bad investment decisions three or four years ago. One report has it that provincial authorities are still greenlighting new ones. Presumably Beijing has ways of ensuring that they won’t get built.
Interesting caveat – “”Specifically, JPMorgan will no longer finance “Transactions that involve asset-specific financing where the proceeds will be used to develop a new greenfield coal mine or a new coal-fired power plant in a high income OECD country.”” What about countries which aren’t high income OECD?
Good catch Karl. Misleading title. Joshua, please clean up your titles!
I consider it not unlikely that we will be seeing large coal surpluses dumped in developing countries in the coming years.
It is not economical for Australia to build new coal power stations that use stranded coal. That is, coal which is basically free. It also was not economical in the past, and certainly not economical now, for Australia to ship coal from Australia to parts of Australia that didn’t have convenient deposits of coal.
Transporting coal to a port costs money, loading it onto a ship costs money, moving it across an ocean costs money, unloading it and getting it to a power station costs money. This puts a floor on the price of imported coal. A price that developing nations don’t want to pay.
So developing countries are unlikely to increase their imports of coal. In fact, we are likely to see a continuing decrease in the amount of coal exported to them. New coal capacity simply cannot compete with the cost of new wind and solar capacity.
Well I certainly hope you’re right Ronald.
BTW, do you have Belgian ancestors? Your name sounds pretty local.
My father comes from near Boxmeer in North Brabant in the Netherlands. An hour’s drive from the border. There are still plenty of Brakels’s there.
Sounds like lawyers and PR working overtime to make a nice greenwashing statement.
Exactly my thoughts. So they will still finance greenfield coal mining and power plants in poorer countries? Seems this policy statement from JPMorgan is more symbolic than real. But, we will see. They must know that coal now is a financial risk, even though they can’t care less about the environment
They didn’t seem to have such conscious when they boned free energy(Nikola Tesla) in the early 1900s.
They’re just taking this stance because it’s economically opportunistic.
Burn in hell JPMorgan.
Announce you won’t invest in new coal after it is apparent that new coal is already dead. Hardly inspiring.
Passionate hatred for J.P. Morgan personally.
Some of the worst people on the planet.
They have competition for the title, but are fond of mentioning how competitive they are.
And yet MIT continues to invest in coal.
The right way to put this is that coal continues to make MIT shrink its endowment.
🙂
Yes, it’s great to see this courageous leadership after coal stocks have lost more than 90% of their value in the past year, and two of the three largest coal companies are in bankruptcy.
In unrelated news, Jamie Dimond said that if we don’t act fast, the carrier pigeon population is going to be in big trouble.
The headline mentions an analogy to child labour, but the post does not follow this up at all.
And as the lowest cost metallurgical coal producer, Australia may end up with the last operating coal mine in the world. I wonder if Tony Abbott will ask to be buried in it?
Latest news on the coal money – German lignite assets worth 8 GW of power generation are worthless:
http://www.reuters.com/article/us-vattenfall-germany-lignite-idUSKCN0WD0T8
https://global.handelsblatt.com/breaking/exclusive-swedish-utility-vattenfall-struggling-to-sell-german-lignite-business
Another company – Mibrag which is owned by Czech investors – closes 10% of mining and power generation blaming sunshine and wind:
http://www.naumburger-tageblatt.de/mitteldeutschland/jobabbau-im-tagebau-mibrag-will-bis-zu-300-stellen-streichen-23703738
Machine translation:
https://translate.google.com/translate?sl=de&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.naumburger-tageblatt.de%2Fmitteldeutschland%2Fjobabbau-im-tagebau-mibrag-will-bis-zu-300-stellen-streichen-23703738&edit-text=
Germany’s No.1 utility RWE who runs western Germany’s lignite assets said so 3 days ago:
http://www.energynewsmagazine.at/de/rwe-chef+sieht+keine+erholung+der+strom-gro%C3%9Fhandelspreise_n8304
Machine translation:
https://translate.google.com/translate?sl=de&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.energynewsmagazine.at%2Fde%2Frwe-chef%2Bsieht%2Bkeine%2Berholung%2Bder%2Bstrom-gro%25C3%259Fhandelspreise_n8304&edit-text=
ha! coal is dying even faster than expected. 🙂
Good riddance.
“new greenfield coal mine or a new coal-fired power plant in a high income OECD country”
While better than nothing is a very weak statement. Coal plants in low to medium income countries (where the tide is not already turning) no problem. Invest in existing coal mines? Sure!
I caught that wording as well..