The International Finance Corporation (IFC) is the biggest development institution globally, focused on the private sector in developing nations. This institution recently announced its plans to stop supporting new coal projects under its updated Green Equity Approach Policy. Prior to this, the policy required its clients to decrease their exposure to zero by 2030.
Financial intermediaries make up over one-half of the institution’s investments and have been granted nearly $40 billion since 2019. This support has allowed its clients to support a number of new coal projects over the last five years.
For instance, PVI Holdings offered insurance to Vietnam’s Vung Ang II coal power plant in 2021. Another client, Indonesia’s Hana Bank, funded a 2GW coal power plant in 2019. Forecasts show that the plant will release 10 million tons of CO2 annually.
David Pred, executive director of NGO Inclusive Development International, stated that the IFC needed to enforce the updated policy with its current financial intermediary clients Recourse codirector Kate Geary stated that this move by the IFC had been a long time coming, noting that it conveyed a signal to the broader investment community that coal’s era was over. This comes after more financial institutions globally end their support for this fossil fuel.
However, a recent report by Global Energy Monitor shows that while global public coal funding has significantly dwindled, some projects are still being financed by private funds. The report found that of the 99 private financial institutions the updated or adopted new policies last year, most were inadequately aligned with insurers, banks and investors. Additionally, only 12 of these policies were considered powerful enough to stop support for the developers of new coal power plants and mines.
The International Finance Corporation will soon issue a plan aligning its portfolio with the 2015 Paris Agreement.
Joe Athialy, the executive director of the Center for Financial Accountability, stated that it had taken more than 10 years for the IFC to halt its support for new coal. He added that during this time, the climate crisis had grown worse while communities had their livelihood stolen and gotten scattered, with no one being held accountable for these actions. Athialy then added that he hoped the IFC would act faster to halt funding for gas and oil.
The International Finance Corporation isn’t new to controversy; it has been involved in other contentious projects, including a hydropower project in Mozambique that threatens to displace thousands.
As funding sources continue to dry out, extractors such as Warrior Met Coal Inc. (NYSE: HCC) could find themselves having to rely on raising money from their stockholders alone if they need to invest in expanding their operations.
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