Financial institutions have channelled US$745 billion (S$1 trillion) over the past three years into companies planning new coal-fired power plants, according to a report by environmental groups which are urging global banks to stop financing the sector as part of an effort to combat climate change.
The report by Urgewald, BankTrack and 30 related NGOs was released as delegates and world leaders meet in Madrid for a 12-day UN climate summit, where they are expected to hammer out some of the details of the 2015 Paris Climate Agreement.
Governments are facing increasing pressure to step up their commitments on fossil fuel cuts after a major UN report last year warned global warming must be capped at 1.5 deg C and the global economy must be "carbon neutral" by 2050 to stay under that threshold.
The report released last Thursday cites over 1,000 new coal power stations or units in the pipeline.
Burning coal is the single largest source of mankind's carbon dioxide (CO2) emissions, which are blamed for heating up the planet and driving more extreme storms, floods, fires and melting of ice caps. Under the 2015 Paris Climate Agreement, nearly 200 nations agreed to limit global warming this century to well below 2 deg C above pre-industrial levels, and aim for 1.5 deg C if possible to cap the damage from catastrophic disruptions to the climate and advancing seas.
A key way to achieving the Paris goals is to rapidly switch away from burning highly polluting coal.
The amount lent to companies planning new plants was calculated using data covering both lending and underwriting between January 2017 and this September for all 258 coal plant developers identified in the Global Coal Exit List, drawn up by Urgewald and BankTrack.
Urgewald is a Germany-based environmental and human rights non-profit organisation, while BankTrack, registered in The Netherlands, is an international NGO that focuses on banks and the activities they finance.
"Most of the top banks providing loans or investment banking services to these companies acknowledge the risks of climate change, but their actions are a slap in the face to the Paris Climate Agreement," said Mr Greig Aitken, climate campaigner at BankTrack.
Since January 2017, a total of 307 commercial banks have provided US$159 billion in direct loans to coal plant developers, with Japanese banks accounting for 32 per cent of the loans, and European banks accounting for 26 per cent.
The top three lenders listed in the report are the Japanese banks Mizuho, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Banking Corporation. They are followed by US giant Citigroup and BNP Paribas of France.
The three Japanese mega banks together provided US$39.3 billion in loans to coal plant developers between 2017 and 2019, according to the report, with some of the financing going towards controversial coal-fired power stations in Vietnam and Indonesia.
Since January 2017, a total of 300 commercial banks have channelled over US$585 billion to coal plant developers through underwriting, such as raising capital for companies by issuing bonds and shares and selling them to investors.
"Chinese financial institutions round out all the top 10 underwriters, with Japan's Mizuho 11th biggest underwriter of coal," US-based non-profit 350.org noted.
Chinese banks accounted for 69 per cent of underwriting for coal plant developers since January 2017, the report said.
• With additional information from Agence France-Presse