- A new report shows that the World Bank continues to supply funding to some of Asia’s largest coal developers through its financial intermediaries.
- The multilateral lender committed in 2013 to cease its involvement with coal, and more recently pledged to align its investments with the Paris Agreement.
- The investigation from environmental and economic watchdogs shows that the World Bank’s private lending arm holds stakes in client banks that are funding at least 39 coal developments throughout China, Indonesia and Cambodia.
- The report highlights the case of the planned Jambi 2 development in Sumatra, an “unwanted and unneeded” venture that the report says would severely impact the health, quality of life and livelihoods of affected communities already suffering the impacts of intensive coal development in the area.
The World Bank continues to indirectly finance some of Asia’s largest coal developers despite its pledges to stop doing so and align with the Paris Agreement, according to a new report from environmental and economic watchdogs.
The report, by Inclusive Development International, Recourse and Indonesia-based civil society organization Trend Asia, shows that the World Bank’s private sector subsidiary, the International Financial Corporation (IFC), invested in banks and other financial institutions that are funding at least 39 coal developments that could generate more than 68 gigawatts of new coal-powered capacity throughout China, Indonesia and Cambodia.
“This is the opposite of the sustainable development that IFC purports to promote, and it is having a devastating impact on coal-affected communities throughout Asia and the entire planet in this time of climate peril,” David Pred, executive director of Inclusive Development International, said in a statement.
In 2013, the World Bank committed to withdraw from coal and later pledged to align its investments with the Paris Agreement. A 2019 Green Equity Strategy, which compels the multilateral lender’s client banks to halve their coal exposure by 2025 and eliminate it from their portfolios by 2030, was initially welcomed by observers. However, the presence of “loopholes and gray areas” in the strategy enables IFC clients to continue to funnel capital to coal developers and coal-powered industrial projects, the report says.
The report follows formal complaints lodged against the IFC last month by communities in Indonesia’s Banten province, for its backing of two major developments in the Suralaya coal power complex through equity investments in project financier Hana Bank Indonesia.
The additional Suralaya developments would boost the mammoth coal plant’s carbon dioxide emissions by 250 million metric tons, and have already resulted in forced evictions of people living within the project footprint, according to the complaint letter filed to the World Bank’s compliance ombudsman.
In addition to the Suralaya projects, the IFC is indirectly supporting a planned 700-megawatt coal-fired power plant in Sumatra called Jambi 2 through its stakes in Postal Savings Bank of China. The project would be the latest of more than a dozen coal mines in the province of Jambi, one of Indonesia’s most important coal-producing regions.
Postal Savings Bank of China is by far the largest financer of coal developers in the IFC’s portfolio, the report says. In 2015, the IFC purchased a $300 million equity stake in the bank, which went on to provide $57.3 billion in what the report terms “no-strings-attached credit lines” to companies developing dozens of coal-fired power plants in Asia, including China Huadian, the developer of Jambi 2.
“It’s hypocritical for the IFC to allow its banking clients to finance projects like Jambi 2 and other coal development in Asia while at the same time promising to align its lending with the Paris Agreement on Climate Change,” said Kate Geary, co-director of Recourse.
Geary added that the World Bank needs to make more effort to put its commitments made on paper into practice to avoid supporting projects that “wreak devastation” on affected communities and significantly contribute to climate change.
According to the report, local advocates and community members in Jambi province say the new coal project is unwanted and unneeded. On the contrary, it will “exacerbate the already devastating impacts of coal development in the area,” the report says, citing how coal already plagues the lives of roughly 3,000 people living in the immediate area.
Already, thousands of coal trucks clog the roads of the province, the report says, rutting and distorting the roads and leading to gridlock that prevents residents from accessing essential shops, businesses and health care services. Mine waste has also devastated natural water sources once used for drinking, bathing and fishing, with local residents telling report authors of resulting diminished livelihood prospects and reduced quality of life.
“Ongoing coal development in Indonesia, including the Jambi 2 plant, will accelerate climate change and its catastrophic consequences,” Novita Indri, an energy campaigner at Trend Asia, said in a statement. Indri described the project as a “slap in the face” for Indonesia as an island nation that is “uniquely vulnerable to rising sea levels and already suffering from extreme weather events.”
A rapid phase-out of coal is a central pillar of every emissions reduction scenario that avoids the direst effects of climate change, according to the Intergovernmental Panel on Climate Change (IPCC).
While Indonesia has taken steps toward phasing out the fossil fuel, enacting in 2022 regulations to prevent permissions for new coal projects, the report notes that plants with secured permits or projects on the government’s Electricity Supply Business Plan (RUPTL) can continue to move forward. As a result, Indonesia currently ranks third in the world for the amount of coal power capacity under construction, behind China and India.
“There are plans to build as many as 14 new coal power plants on the island [of Sumatra],” the report says, “which will bring new risks for local residents and will increase demand for coal production exacerbating the harms nearby communities are already experiencing.”
The report calls on the IFC to use its weighty influence as a major shareholder to halt its clients’ financing of coal developments by closing all the loopholes that enable the continued flow of funds. Only by doing so will the IFC demonstrate that it’s serious about its commitment to support the clean energy transition, the report says.
“The IFC has contributed to serious harms related to coal expansion in many countries,” Pred said. “Now it has a responsibility to repair the damage it has done and prevent future harm by requiring that all of its financial intermediary clients, including Postal Savings Bank of China, stop financing coal development immediately.”
Carolyn Cowan is a staff writer for Mongabay. Follow her on 𝕏 @CarolynCowan11.
Banner image: Coal mining in East Kalimantan scars the landscape that was once replete with natural ecosystems and resources. Image by Rhett A. Butler for Mongabay
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