A fund manager has asked the following questions based off the current guidance on thermal coal within the FI Guidance docs. Hoping you can provide some clarification on the below dot points.
It states ceasing support to thermal coal companies that are building new infrastructure or investing in new or additional etc. Does this mean that investments can be made into existing thermal companies that are not building or expanding their coal operations?
Are banks or other financing entities defined as ‘coal companies’ if >5% of their revenues are derived from lending to a traditional coal mining company?
Can you provide guidance on what ‘other support’ to thermal coal companies entails?
Hi Mike, thanks for flagging this again. Firsly, its important to note that these are recommendations in our guidance and not requirements for validation. Therefore the coal phase-out policy can be disclosed as part of the SBT but it will not impact the ability of the FI to be approved based on its other targets.
The spirit of the guidance reflects the need to stop financing of new coal assets but does enable financing of companies who are not expanding coal assets so that the FI can engage with the companies
No, the definition of coal companies does not extend to financial institutions lending to the sector
Other support was both direct financial e.g. lending, and any other facilitation support such as underwriting, insurance etc. Again, as this is a recommendation and not a requirement, it is designed to serve as guidance for how FIs should be addressing this sector. The recent HLEG report on net-zero targets confirmed that financial institutions must end all types of support: "On coal for power generation, net zero targets and transition plans of all financial institutions must include an immediate end of: (i) lending, (ii) underwriting, and (iii) investments in any company planning new coal infrastructure, power plants, and mines. Coal phase out policies from financial institutions must include a commitment to end all financial and advisory services and phase out exposure, including passive funds, to the entire coal value chain no later than 2030 in OECD countries and by 2040 in non-OECD countries. Coal investments that remain in the portfolios of financial institutions must adopt phase out plans with facility-by-facility closure dates that include just transition plans for workers." https://www.un.org/sites/un2.un.org/files/high-level_expert_group_n7b.pdf