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.