In a review of 150 global commercial banks, only four banks have a policy that restricts finance for metallurgical coal (or “met coal”, i.e.  coal for steelmaking), reports a new briefing by BankTrack. Many banks have taken steps to phase out finance for thermal coal, but met coal is missing from the financial sector's coal phase-out plans. 

Metallurgical coal accounts for a quarter of the global coal trade. Mining, transporting, and burning coal for steel has widespread and well documented negative impacts on communities and critical nature across the world. It is also a significant contributor to global GHG emissions. Because of its dependency on coal, the steel industry is responsible for 11% of global CO2 emissions, and 7% of global GHG emissions.

For the world to limit the global temperature rise to 1.5ºC,  the International Energy Association has called for no new metallurgical coal mines, stating that existing mines are sufficient to supply demands until 2030. Despite this, there are 116 new metallurgical coal mines, and 52 mine expansions underway. If these plans are realised, it would add an additional 400 million tonnes of coal per annum (Mtpa), equivalent to Poland's 2022 GHG emissions. 

The briefing addresses financing by banks such as Bank of America, Citi, MUFG, Barclays, Mizuho, JPMorgan Chase, RBC, Westpac, NAB for companies pushing metallurgical coal expansion, including BHP Mitsubishi Alliance (BMA), Teck Resources/Elk Valley Resources, Glencore, and Whitehaven Coal. 

BankTrack found that although four large commercial banks do have policies on metallurgical coal (namely Lloyds Bank, HSBC, Nordea, and Macquarie) their policies are incomplete. While three out of the four banks exclude project finance for new metallurgical coal mines,  only two restrict general corporate finance for companies building new mines. No banks have policies that include their capital market activities, meaning all four banks could still underwrite bonds for metallurgical coal companies expanding production. 

Julia Hovenier, Banks and Steel Campaigner at BankTrack says: “When it comes to fueling climate catastrophe, there’s no difference between burning coal for power generation and burning coal for steelmaking. Banks need to get this distinction out of their head, and commit to ending finance for all coal.” 

Summary of recommendations for banks:

1. Immediately exclude direct project finance for all new met coal facilities, and the expansion of existing facilities. 

2. Immediately exclude corporate finance, including the underwriting/facilitation of bonds, for steel companies pursuing coal-based steelmaking and metallurgical coal companies developing new assets. 

3. Provide transition finance to support steelmakers and coal companies to phase out coal, with strict deadlines and KPIs that are in line with a phase-out in steelmaking 2030 in OECD countries, and 2050 in non-OECD countries. 

4. Increase finance for key enabling sectors like renewable energy, green hydrogen for steelmaking, and Direct Reduced Iron (DRI) production, while ensuring that these sectors are rightfully categorised as high risk, and sufficient environmental and human rights due diligence is performed.

Read the full briefing here.