Banks loathe investing in filthy coal ... or do they?
Reluctance to risk reputations on new coal-fired projects, but they still buy into a cleaner, greener Eskom
Globally, funding for new coal-related projects is drying up. The same appears true in SA, where in recent months it has been reported that Nedbank, Standard Bank and FirstRand will no longer fund coal.
Last week Enoch Godongwana, the ANC’s head of economic transformation, lamented the dearth of financing for coal mining and suggested that pension funds could be forced to invest in this area.
But a closer look reveals a more nuanced picture.
All three banks, as it stands, will not fund two new independent coal-fired power projects, Khanyisa and Thabametsi. However, for two of them financing other coal-fired power stations is not off the cards. And none have said they would stop funding coal mining.
Nedbank said its strategy is to support the diversification of SA’s energy supply over time. As such it will no longer finance new coal-based generation projects.
Standard Bank said it is open to funding coal-fired power generation projects that employ “clean coal” technologies.
“Standard Bank supports the adoption of higher efficiency and lower-emission coal-fired power plants,” said spokesperson Ross Linstrom.
Leanne Govindsamy of the Centre for Environmental Rights said financiers do appear to be moving away from funding new coal power stations for various reasons.
“These may include environmental concerns – however they relate more to the reputational risk involved in funding new coal power stations and the implications of being associated with massive greenhouse gas emissions while the global movement towards urgent action on climate change grows.”
Most banks, including Standard Bank, remain heavily invested in coal mining, said Govindsamy.
Rand Merchant Bank – the corporate and investment arm of FirstRand – said it will provide financial services to clients where the mining, processing or use of thermal coal for energy generation forms a substantial part of the clients’ primary business activities. The bank said all transactions are subject to strict environmental and social due diligence processes.Nedbank said it is committed to help address the energy crisis and so continues to support Eskom, the existing coal-based generation fleet, and the mining of coal which supports such generation. Here too, Nedbank said it applied stringent oversight of environmental practices. At present 2.13% of the bank’s total group lending and finance commitments relate to renewable energy generation – which compares favourably with the 0.43% of total funding of coal- and fossil-fuel-based energy generation.
Govindsamy said that without clear government policy about reducing reliance on coal, companies would be slow to change. “Civil society therefore remains committed to driving proposals on sustainable energy and the move away from coal mining,” she said.
But Xavier Prévost, senior coal analyst at XMP Consulting, said coal miners are struggling to attract funds. “We are actually begging people to get involved in coal. But mines cannot be financed unless you can prove a mine can make money. In SA, it’s difficult to say.”
Although there is still demand for coal, Prévost said investment is waning owing to unsupportive legislation and uncertainty about the future of Eskom.