Indian banks invest nearly 29 billion dollars in coal sector since 2016 despite renewable energy growth | Chandigarh News
BATHINDA: Close to USD 29 billion was invested in the Indian coal sector since 2016, finds a new report on World Decarbonisation Day. This occurred despite declining prices of renewables, which are Rs 2–3/kWh compared to coal’s Rs 4.39/kWh, stressed debt in the coal-power sector, and stricter environmental scrutiny.India’s leading banks invested about USD 29 billion in coal between 2016 and 2023. Approximately USD 15.2 billion was disbursed as coal loans, and USD 13.5 billion was provided in coal underwriting services. Public banks provided roughly 75% of the coal loans, while private banks financed roughly 83% of the total underwriting. State Bank of India (SBI) and private lenders like Axis Bank and ICICI Bank were among the leading coal financiers, according to an analysis by think tank Climate Risk Horizons. The analysis finds that while a growing number of Indian banks have started integrating climate risk management policies, financing renewable energy projects, and actively measuring scope emissions, most still remain major financiers of coal.The report highlights that this is happening despite a combination of factors that make direct coal financing risky: declining prices of renewables, fluctuating capacity utilisation of coal-fired power plants, stressed debt in the coal-power sector, and stricter environmental scrutiny. Between 2016 and 2020, major Indian and foreign investors such as HDFC Mutual Funds and ICICI Prudential lost an estimated USD 3 billion in foregone earnings because of the underperformance of coal sector stocks.Over this eight-year period, the amount of coal loans fluctuated significantly, but coal underwriting by Indian banks remained relatively stable with an average of USD 1.7 billion per year. Data shows that underwriting has become the dominant channel for financing coal globally. In India, higher indirect coal financing by private banks indicates a continued desire to profit from the climate-changing fuel, albeit with a lower risk exposure given the coal sector’s historical volatility.“Underwriting coal might look cleaner than direct lending, but this backdoor support delays India’s clean energy transition and makes the path to net zero more difficult. Banks are starting to acknowledge the financial harm climate change is causing to their portfolio, while simultaneously supporting the climate-destroying coal industry despite proven, financially viable clean energy alternatives,” said Anusha Das, co-author of the report.Over 200 financial institutions worldwide—including more than 80 banks—have adopted coal exclusion policies to align with decarbonisation and net zero goals. In India, Federal Bank, RBL Bank, and Suryoday Small Finance Bank have set an example by adopting coal exclusion policies. While a growing number of Indian banks have started integrating climate risk management policies at the board level, financing renewable energy projects, and actively measuring scope emissions, most banks continue to invest in fossil fuels, with 25–35% of their loan books tied to coal.“Continuing to finance coal expansion under the pretext of energy security ignores economic reality: new coal investments are increasingly unprofitable and risky and weaken India’s ability to compete in a global economy that is seeking to decarbonise. Indian banks must urgently adopt coal phase-out policies and proactively shift to renewable investments in the interests of energy security, financial stability, and the country’s future growth,” said Sagar Asapur, co-author of the report.
