WASHINGTON (Reuters) – Bank of America announced Wednesday it will reduce its financial exposure to coal companies, acknowledging the risk that future regulation and competition from natural gas pose on the industry.
The bank announced its new coal policy at its annual meeting, saying it would cut back its lending to coal extraction companies and coal divisions of broader mining companies.
“Our new policy reflects our decision to continue to reduce our credit exposure over time to the coal mining sector globally,” said Andrew Plepler, head of corporate social responsibility at Bank of America. (BAC.N)
The announcement comes amid a growing fossil fuel divestment movement, in which universities, churches and large asset owners are being pressured to abandon or curb their investments in high-carbon energy.
Global bank HSBC [HSBCUK.UL] said in a client research note in April that the recent drop in energy prices has put a spotlight on “stranded” fossil fuel assets, making them a risk to investors.
“As rigs are dismantled, capex (capital expenditures) is cut and operating assets quickly become unprofitable, stranding risks have become much more urgent for investors to address, including shorter term investors,” the research note said.
Bank of America’s new policy arose from pressure from universities and environmental groups, the bank said.
“From these engagements, we have developed a coal policy that will ensure that Bank of America plays a continued role in promoting the responsible use of coal and other energy sources, while balancing the risks and opportunities to our shareholders and the communities we serve,” it said.
The Rainforest Action Network Climate, one of the groups that pressured Bank of America on this issue, said the announcement represented a “sea change”
“It acknowledges the responsibility that the financial sector bears for supporting and profiting from the fossil fuel industry and the climate chaos it has caused,” said Amanda Starbuck, RAN’s energy program director.
The RAN said Bank of America has made strides since 2011, when it was one of the biggest bankrollers of coal. On Monday, it got the highest rating of any bank in the RAN’s 2015 Coal Finance Report Card.
Separately, Bank of America shareholders on Wednesday rejected a resolution requiring the bank to report on its impact on climate change from financing fossil fuel projects.
The company had opposed the measure, saying it already reports on emissions from its U.S. electric utility portfolio.