Fossil banks, no thanks! chant protesters. Financial institutions that lend to coal users are under pressure from climate campaigners. Their anger will have been stoked by the recent research from lobby group Europe Beyond Coal identifying nearly €8bn of loans to coal-burning power companies since 2018.
It is not just campaigners. Nearly a quarter of shareholders supported climate change resolutions at annual meetings this year. Critics focus on banks’ bottom lines, as well as the wider impact on society. Billionaire hedge fund manager Christopher Hohn compares the risks of lending to coal with those of subprime mortgages ahead of the financial crisis.
Central bank regulators in Europe, Australia and Singapore are planning climate stress tests. How badly would banks suffer from the early closure of coal-fired power plants? What impact would extreme weather events have on sovereign risk or mortgage books?