French financial institutions have the most robust policies in place when it comes to eliminating support for coal projects and the phasing out of current commitments. However, most banks and insurers still allow direct financing or insurance cover for new coal projects and have weak phase-out strategies, according to new data.

The research, published by Reclaim Finance, in partnership with 27 other NGOs, counts, compares and rates the coal policies adopted by banks, (re)insurers, asset owners and asset managers.

The Coal Policy Tool examines policies according to five criteria: the exclusion of coal mines, plants and infrastructure; the exclusion of all financial services to companies planning new coal projects; the elimination of companies which are most exposed to the coal sector, based on their share of revenues or electricity production from coal; the removal of the largest coal producers and plant operators; and the quality of the coal phase-out strategy.

Each indicator is given a score from 0 to 10 (0 being no policy in place and 10 a robust policy or plan). The tool spans 30 countries, from Australia to the US, and helps users to easily identify the good, the bad and the in-between of policies adopted by FIs.

The research reveals that many French financial groups are now requiring that their clients adopt a coal phase-out plan by the end of 2021, pledging to drop clients who are unable to prove their ability to exit coal.

The French government has committed to the phasing out of coal power by 2022 and, at the end of last year, it adopted a new law that officially banned export credits for coal, shale oil and gas – becoming the first country to do so.

French banks and insurers followed suit; AXA, BNP Paribas, Crédit Agricole, Crédit Mutuel, Natixis and Société Générale have all committed to the exclusion of coal mines, plants and infrastructure, and have a robust global coal phase-out strategy in place, according to the database.

Several asset managers and asset owners in France have also launched comprehensive coal phase-out strategies, including AG2R La Mondiale, AG2R La Mondiale Gestion d’actifs, Crédit Mutuel – Assurances, Crédit Mutuel AM, AXA and Crédit Agricole Assurances.

Italian bank UniCredit also scores highly when it comes to the exclusion of coal projects as well as the phase-out of global coal commitments.

However, key financial institutions continue to lack any policy on coal, and most banks and insurers still allow direct financing or insurance cover for new coal projects. This is the case for the UK insurance market Lloyd’s, the US insurers AIG and Liberty Mutual, the Chinese bank ICBC and the Polish insurer PZU, which do not exclude any new coal projects, finds the report. Many other financial institutions only have light policies in place or exclude certain projects.

When it comes to the phasing out of global coal commitments, it has not been made a priority by financial institutions. The research finds that many banks across a diverse geographical area do not have a strong coal phase-out strategy in place, including Standard Chartered, SMBC, Nordea, Mizuho, MUFG, JP Morgan, HSBC, Citi and many more.

“Only an exceedingly small number of financial institutions have started to commit to reducing their exposure to the coal sector to close to zero at the latest by 2030 in Europe and OECD countries, and by 2040 in other countries, and adopt a strategy to meet this target,” reads the research.

Meeting sustainability criteria and reducing the support for fossil fuels have been high on the global agenda since the signing of the 2015 international Paris Agreement, which aims to keep greenhouse gas emissions below 2°C above pre-industrial levels.

Coal generates nearly 40% of the world’s electricity, with 80 countries using coal power, a figure up from 66 in 2000, according to an investigation by Carbon Brief, a UK-based research and media company. CO2 emissions from existing plants are enough to breach the carbon budget of 2°C.