Financial research on the coal sector shows that a total of $228 billion is being invested, as of December 2021, in the coal industry via bonds. While climate science is calling for an annual decrease of global coal production and a swift exit of the sector, over a quarter of this amount – $60 billion – is being invested in companies that are expanding their coal operations.
Who are the top coal bond holders? In line with the wider analysis, a small number of financial institutions play an outsized role when it comes to investing in coal bonds. The top five investors in coal bonds account for 20% of all coal bond holdings.
Which investors are the most hypocritical?
While being among the biggest bondholders of coal companies is a problem in itself, the financial research also reveals glaring contradictions between the amounts being invested in coal bonds and the net-zero commitments made by the same institutions.
Allianz is one of the biggest insurers worldwide and is a member of the Net Zero Insurers Alliance, Net Zero Asset Owners Alliance and the Climate Action 100+. It has recently updated its coal policy and, while it aims for a coal phase-out worldwide by 2040, the criteria are still loopholed, including on bonds. More importantly, Allianz does not apply its divestment policies to the more than $1 trillion in third party assets which it manages (via its branches Allianz GI and PIMCO). This results in the institution being right at the top of the tables as the fourth largest holder of coal bonds ($7.6 billion) and one of the largest investors in coal development via the most Toxic Bonds (i.e. linked to coal expansion), in complete contradiction with its commitments.
HSBC is a member of the Net Zero Banking Alliance and, under pressure from shareholders, made a commitment to a total phase-out from the coal sector by 2040 worldwide. Yet HSBC is still supporting the expansion of the industry – including via investment of nearly $650 billion in the most Toxic Bonds, meaning the bonds linked to coal expansion.
BlackRock adopted in 2019 a very weak coal policy. Because of its many loopholes, BlackRock still has over $9.8 billion in coal bonds, $ 2.7 billion of which is invested in the most Toxic Bonds, meaning the bonds linked to coal expansion. BlackRock is also one of the biggest buyers of new fossil fuel bonds worldwide and has not committed to stop buying future debt issued by coal developers. Despite these appalling figures, BlackRock is still a member of the Net Zero Asset Manager Initiative.
Bonds are a critical source of funding for the coal industry and might make their holders the last resort for companies looking to expand their coal operations. Financial institutions must deny any future debt to these companies and divest from their existing coal bond holdings. Beyond the obvious dramatic indirect climate impacts of such investments, investors will also risk losing money if they don’t rapidly move away from fossil fuels.