Banks face pressure to stop financing use of coal in steel production

Operations Inside The SunCoke Energy Partners LP Ceredo Terminal As Coal Production Rises
Metallurgical coal is dumped onto a pile in Ceredo, West Virginia, in 2017. Climate groups are pressuring banks to stop financing the energy source, which is used to heat blast furnaces in the steelmaking process.

Luke Sharrett/Bloomberg

Sustainable finance advocates are pressuring five of the six largest U.S. banks to stop financing metallurgical coal, an emissions-heavy energy source used to heat blast furnaces in the steelmaking process.

In a letter to the banks on Thursday, climate groups called for commitments to “end all dedicated financial services” for the development and expansion of metallurgical coal projects and related infrastructure.

Metallurgical coal contains a higher amount of carbon, as well as ash and moisture, than thermal coal, which is more commonly used to generate power.

The climate groups argue that banks should include metallurgical coal in their phase-out plans and increase lending to “key enabling sectors” for the steel industry’s “transition.”

“It is essential that other energy sources are identified for both steelmaking and power generation, and that all coal remains in the ground,” the letter states.

The letter was signed by 67 climate organizations globally, including BankTrack, the Rainforest Action Network and the Sierra Club, and sent to 50 large financial institutions around the world.

The U.S.-based recipients were Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley. Those five banks provided a combined $29.6 billion to finance metallurgical coal projects since 2016, according to the letters.

BofA, Citigroup and Morgan Stanley declined to comment. Goldman Sachs and JPMorgan did not respond to requests for comment.

In a March report, Citi committed to reducing the carbon exposure of its loan portfolio by 2030 in four sectors: steel, auto manufacturing, commercial real estate and thermal coal mining.

For the steel industry, Citi committed to reaching a score of zero, which is the best possible score under the Sustainable STEEL Principles, a reporting framework developed by the Rocky Mountain Institute, a nonprofit organization focused on decarbonization efforts.

Citi had previously committed to reducing 90% of emissions from thermal coal mining by 2030, based on a 2021 baseline.

JPMorgan Chase has set a 2030 target to reduce 30% of its emissions tied to the steel industry based on a 2019 baseline. BofA, Goldman Sachs and Morgan Stanley did not set 2030 targets to reduce their portfolio emissions from the steel industry.

Ariana Criste, who leads the steel campaign at Industrious Labs, one of the sustainable finance groups that signed the letter, said that metallurgical coal continues to be a “blind spot” for the financial industry.

“If the U.S. banking industry and the global banking industry continue to underwrite and enable the steel industry to rely on this outdated fossil fuel,” Criste said in an interview, “the green steel future is going to continue to remain out of reach.”

The activists are targeting not only banks, but also the steel industry, saying that steel production should be decarbonized or phased out to help meet commitments to prevent the worst effects of climate change.

Over the last decade, climate activists have pressured banks and other companies to stop funding greenhouse gas-emitting industries, and also to provide more transparency about their carbon footprints.

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