JP Morgan Change & Co. is tightening its standards for coal financing, according to a new Environmental and Social Policy Framework released Tuesday. Under the new framework, “transactions that involve asset-specific financing where the proceeds will be used to develop a new greenfield coal mine or a new coal-fired power plant in a high income [Organization for Economic Co-operation and Development] country,” are prohibited.
The policy is not entirely cut and dry, however, as coal-fired plants with carbon capture and storage will be considered on a case-by-case basis. “We will continue to apply enhanced due diligence to transactions involving coal-fired power generation and consider the type of technology, regulatory drivers, and the company’s commitment, capacity and track record in managing environmental and social risks,” the document says.
Non-OECD countries don’t get a free pass under the new framework but do have slightly looser standards. “JPMC will not provide project financing or other forms of asset-specific financing where the proceeds will be used to develop a new coal-fired power plant located outside of high income OECD countries, unless it employs ultra-supercritical steam generation technology,” the framework dictates.
JP Morgan joins a growing list of banks putting stricter standards on coal financing. Citigroup announced in October 2015 that it will cut back on financing for coal mining projects.
In May 2015, Bank of America made a similar commitment, pledging to reduce its credit exposure to coal mining companies. The bank went one step further, committing to support the development of carbon capture and storage technology. “Through our partnerships we will promote the necessary conditions for implementing carbon capture and storage on a global scale. We will employ our resources as a financial institution to promote the development and deployment of these advanced technologies to reduce carbon emissions produced by the burning of fossil fuels,” the banks’ coal policy says.
Morgan Stanly, in November 2015, also pledged to cut back on coal mining financing and to “decline financing transactions that directly support the development of new or physical expansions of coal-fired power generation, unless there is sufficient carbon capture and storage or equivalent emissions and pollutant reduction technology in place,” in all developed economies. The Morgan Stanly coal policy also requires increased oversite of coal-fired power plant projects in developing economies.
