Nijmegen, 24 January 2024 - Amid a global decline in project finance for coal-fired power plants, a new report by Dutch research organisation BankTrack finds that corporate finance is the preferred option for building new coal infrastructure. The report shows that there are still loopholes in coal exclusion policies that allow the banking industry to continue financing new coal projects. This is despite the agreement to move away from fossil fuels launched at the COP 28 Climate Change Summit in December 2023. 

The Coal Havens report examines the coal policies of the 30 largest banks in the Philippines, India, Indonesia, Japan, Malaysia, South Korea, Singapore, Taiwan and Thailand with total assets under management of more than USD 8 trillion. Asia's largest banks were found to have no or weak coal exclusion policies. This leaves room for continued investment in the coal mining industry and power infrastructure and will adversely affect the region's ongoing energy transition efforts.

Indonesia, one of the countries that launched the Just Energy Transition Partnership (JETP) agreement, did not include emissions data from captive coal plants in its 2023 Comprehensive Investment and Policy Plan (CIPP). If included, the data would have significantly increased Indonesia's projected emissions, which would have made achieving the initial JETP decarbonisation target difficult. On the other hand, the Financial Services Authority (OJK) is considering labelling the transition of captive coal-fired power plants in Indonesia's Sustainable Taxonomy if they are used to produce materials considered essential for the energy transition.

One of the visible policy gaps in the sustainability policy of the World Bank's private sector lending arm, the IFC, is captive coal plants. The IFC has adopted the "Green Equity Approach" (GEA), an approach used when working with financial intermediary clients. IFC uses the GEA to purchase equity stakes and encourage clients to reduce exposure to coal projects to near zero by 2030 (and from 2023, no longer provide project finance for new coal plants). However, this policy does not include captive coal plants used for industries such as mining, chemical industry, cement, smelters, etc.

BankTrack's Climate Campaigner, Will O' Sullivan, said that the shrinking coal industry is still getting financing from the biggest banks in the region. "Financiers in Indonesia and multilateral banks like the World Bank and IFC are still opening the door to climate destruction, when they should be distancing themselves from coal." Will said.

Executive Director of Yayasan Indonesia CERAH, Agung Budiono said OJK is currently in the finalization stage of drafting the Taxonomy of Sustainable Finance, also known as the green taxonomy. However, unfortunately in the latest draft, captive power plants are still included as a sector in the transition category. "OJK needs to have a more advanced view of sustainable financing, for that Captive Steam Power Plant (PLTU) should not need to be included in the categorization even though it is no longer green but transitional," he said.

In addition, the increasingly tight financing of coal-fired power plants from outside is still perceived as an opportunity for national banks in financing the coal sector. In fact, national banks should be able to see this fossil energy financing, especially PLTU, as a risk in the future, commonly known as stranded assets.

The coal exclusion policies included in this report were evaluated using Reclaim Finance's Coal Policy Tracker, which assesses banks' investment policies in coal projects, company expansion plans, whether banks have revenue thresholds, coal power generation etc.

While the report focuses on the policies of banks in the Asian region, it also finds that the European banking sector also has great opportunities to benefit from coal in Asia. Barclays, Citi, Deutsche Bank, Standard Chartered and other banks are still providing loans and guarantees for coal projects in Asia.