Citigroup on Monday became the third banking giant this year to slash its lending to coal-mining companies.
The move, which follows similar pledges this year from Bank of America and Crédit Agricole, will make it more difficult for companies producing coal, a major source of pollution and contributor to climate change, to finance future projects.
Now, credit lines extended to any coal companies by Citi must first gain “senior approval” and pass more rigorous ethics guidelines that factor in human rights.
“Citi’s credit exposure to coal mining companies has declined materially since 2011,” Citi said in a 10-page memo on its environmental practices. “Going forward, we commit to continue this trend of reducing our global credit exposure to coal mining companies.”
The U.S. coal industry has been a financial disaster this year. There have been a string of high-profile bankruptcies, and borrowing costs for U.S. coal companies soared from 8 percent at the start of the year to 65 percent in July.
These are all important indicators that the financing activity Citi has pledged to cut down on is getting riskier — which means there are very good reasons for Citi to decrease its exposure to coal companies that have nothing to do with the environment. It’s just what a smart banker should do.
But that still represents a shift for Citi, which, it’s worth remembering, shoveled billions of dollars at bad mortgages in the period leading up to the financial crisis.
Citi did not immediately respond to questions about whether its new commitment goes beyond the decline in lending that would already be expected as the coal industry struggles.
To be sure, there are signs that the banking industry is waking up to the economic and existential threats that climate change poses.
In a joint statement last week, a group of six colossal U.S. banks called for a “strong global climate agreement” during the United Nations’ upcoming conference in Paris. Citi was among them.
But though progress has already been significant, the industry has a long way to go to take really meaningful steps to reduce climate change.
“Reducing credit exposure is only a partial step forward,” Lindsey Allen, executive director of the nonprofit Rainforest Action Network, said in a statement. “We urge Citigroup and Wall Street laggards such as Morgan Stanley to cut all financing ties to both coal mining and coal-fired power.”
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