The U.S coal industry already reeling from lower demand for its products received another bit of bad news today when Citigroup announced it will cut back on coal mining project financing. Financial experts say Citigroup's credit exposure to coal mining had “declined materially" since 2011.
In a statement released by Citigroup spokeswoman Elizabeth Patella, the bank says, “This new policy reflects our declining exposure and our continued commitment to managing environmental and social risks and opportunities.”
The Bank's Environmental & Social Policy Framework guidelines which were posted online at the same time Patella released the statement, say the new policy will apply to coal companies that "use mountaintop removal methods as well as coal-focused subsidiaries of diversified mining companies."
According to the guidelines, "Climate change is a global challenge of tremendous magnitude, and Citi is helping to accelerate the transition from a high-carbon to a low-carbon economy. Going forward, we commit to continue this trend of reducing our global credit exposure to coal mining companies."
Earlier this year Credit Agricole SA and Bank of America Corp. announced they were stepping back from financing coal the coal industry, a move experts say was driven by lawmakers and activists increasing their calls to reign in use of coal, which is considered the biggest contributor to global warming. Next month 200 countries will meet in Paris to hammer out a global deal to reduce fossil-fuel pollution.
Although the Citigroup news is a blow to the coal industry, it is welcomed by the executive director of the Rainforest Action Network Lindsey Allen. The advocacy group has pressured banks for some time to cut their support of the coal industry.
“With Bank of America, Credit Agricole, and now Citigroup withdrawing support for coal mining, this announcement shows major momentum away from financing coal by the banking sector,” he says.
Experts say Citigroup's publically announced hit on the coal industry was as much a PR exercise as a statement for its concern of the environment. They say other controversial fuels that also produce greenhouse gases are not so badly affected under the "framework". According to the guidelines, oil-sands projects have risks that “need to be identified, mitigated and managed," with the bank developing "a risk-review process" for oil-sands clients. The experts say Citigroup also has similar policies for shale oil and gas, which according to the released guidelines had to be “developed in a safe, transparent and environmentally and socially responsible manner".