Banks urged not to fund coal power as government moves to underwrite projects

Activist groups warn providing finance for coal-fired power stations is inconsistent with banks’ commitments to Paris agreement

Environmental and progressive activist groups are urging Australia’s major banks and financial institutions not to fund new coal projects now that the Morrison government has flagged taxpayer assistance for power generation.

The Australian Conservation Foundation, GetUp, Greenpeace, Environment Victoria, the Australian Youth Climate Coalition, the Australian Centre for Corporate Responsibility and the Australia Institute wrote on Thursday to chief executives of the major lenders, warning the provision of finance for new coal, or retrofits of old coal-fired power stations, would be inconsistent with their public commitments to the Paris agreement.

The pressure on financial institutions follows the energy minister, Angus Taylor, calling for expressions of interest in new power generation projects to be underwritten by taxpayers, including, potentially, new coal builds or retrofits.

The government has made it clear that the new projects must be coal, gas, batteries or pumped hydro to be eligible for the government underwriting. A very tight timeframe is also proposed, with proponents having to put their hands up by January 23.

The environmental groups have told the banks the evidence is in on climate change, and an urgent response is required to combat the risks.

The groups have told the banking chiefs they risk providing finance for stranded assets if they finance new coal projects. “We strongly believe that the provision of finance from your financial institution for any new coal generation project or any retrofit to extend the life of an existing coal generator, would be inconsistent with your public position on climate change, counter to the concerns of your customers, and unmindful of the high risk of any new coal investment resulting in a stranded asset.”

The Investor Group on Climate Change – an organisation representing more than 70 Australian and New Zealand institutional investors with more than $2 trillion of funds under management – has raised similar concerns with Taylor.

The IGCC has told the energy minister subsidising high-emission electricity generation is inconsistent with the objectives of the Paris agreement and exposes the assets to substantive carbon price and transition risks.

“For around a decade, investors and banks have been expressing no appetite for exposure to new coal fired generation assets in Australia and investors are unlikely to provide any capital towards new high emission generation assets moving forward,” the IGCC’s letter to Taylor says.