Indonesia’s coal miners face financing squeeze as more banks pledge to ‘go green’

Coal power and mining firms in Indonesia are finding it tougher to raise funds due to climate-crisis concerns and are being increasingly pushed by banks to present concrete-transition plans to shift away from dirty energy.

To date, over 100 globally significant asset managers and owners with assets under management (AUM) greater than US$50 billion, as well as banks and insurers with AUM or loans outstanding larger than $10 billion, have announced their divestment from coal mining and/or coal-fired power plants, Institute for Energy Economics and Financial Analysis (IEEFA) report found.

IEEFA energy finance-analyst Elrika Hamdi expected that it would become increasingly difficult for coal power and mining firms to raise finance for the industry due to growing pressure to transition to renewable energy.

Consequently, a growing number of mining companies announce their commitment to diversify their business portfolio away from coal, Elrika said, although they still aim to maximize profits from coal production.

“Coal price is at all-time high now and [mining companies] are making a lot of profit. The question now is, will these companies remain committed to carry out their diversification [plans]?” she said to The Jakarta Post on Friday. “I hope they’re [wise] enough to know that investing in renewables will generate more benefits for them in the future.”

Standard Chartered bank announced it was ending its partnership with PT Adaro Indonesia, a subsidiary of coal miner PT Adaro Energy, as the British financial giant pledged to stop providing financial services to mining and power-generation companies deriving 100 percent of their revenue from thermal coal, Australia-based campaign-group Market Forces reported in July.

The bank has provided $434 million in funding to the Adaro group since 2006, the campaign-group found. Meanwhile, in April 2021, the bank took part in a lending syndicate that provided another $400 million for the mining company.

National banks are also facing foreign and domestic pressure to stop funding coal business as the Indonesian Financial Services Authority (OJK) demands lenders which belong to the BUKU 4 category — or those with core-capital higher than Rp 30 trillion (US$2.675 billion) — such as state-owned Bank Rakyat Indonesia (BRI) and private lender Bank Central Asia (BCA), to diversify their lending portfolio from fossil fuels to reduce their climate risks.

“Unfortunately, the [scheme] has yet to become mandatory; so, essentially, there are no penalties for those [who have yet] to diversify,” Elrika said.

State-owned lenders Bank Mandiri, BRI and BNI, as well as BCA, all of which are the largest banks by asset in Indonesia, gave out a total of $3.5 billion in loans to coal companies in the 2015-2021 period, according to an August report published by climate-activist group 350.org.

Bank Mandiri provided the largest sum at $3.2 billion in loans, followed by BCA, BRI and BNI at $170.4 million, $122.5 million and $53.3 million respectively, according to the same report.

Source: http://djakarta-miningclub.com/dmc/2022/indonesias-coal-miners-face-financing-squeeze-as-more-banks-pledge-to-go-green/