Goldman Sachs, Which Said "We Will Stop Financing Coal Companies," Provides $150 Million Loan to World's Largest Coal Company

Environmental Activist: "Evidence That Climate Issues Cannot Be Entrusted to Wall Street's Own Mechanisms"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Goldman Sachs, which had pledged to curb financing for fossil fuel-related companies in response to the climate crisis, is facing criticism for lending $150 million (approximately 186.3 billion KRW) to Peabody Energy, the world's largest private coal producer.

The Financial Times reported on the 14th (local time) that this transaction was made to strengthen Peabody's derivatives position amid market turmoil triggered by Russia's invasion of Ukraine. Goldman Sachs announced in 2019 that it would not provide financing such as loans to businesses with high concerns over climate change and environmental destruction, including coal production. However, it stated that it would support companies transitioning from coal at a reasonable pace.

At the time, Goldman Sachs' coal commitment was considered the strongest among major U.S. banks and received applause from environmental activists. Allison Kersh, a policy researcher at the San Francisco-based environmental nonprofit Rainforest Action Network, said, "This shows how vague and non-binding Goldman Sachs' policy is," adding, "(Goldman Sachs) does not seem likely to exit coal." Adele Shreiman, head of the Fossil-Free Finance campaign, pointed out, "Goldman Sachs' recent loan is evidence that climate problem-solving cannot be left to Wall Street banks' own mechanisms."

Since 2019, global banks have begun restricting transactions with coal companies. At the end of that year, HSBC announced it would phase out financing for coal-fired power in European Union (EU) and Organisation for Economic Co-operation and Development (OECD) countries by 2030.

[Image source=AP Yonhap News]

Peabody was hit by coal derivative contracts signed in 2021 due to a sharp rise in coal prices. The company reportedly needed loans due to a $534 million margin call impact. However, with natural gas and crude oil prices soaring, coal companies' performance greatly improved. Peabody recorded a net profit of $513 million in the fourth quarter of last year, its best performance since 1999. Its annual net profit also turned positive at $360.1 million. Peabody, which owns stakes in 17 active coal mines in the U.S. and Australia, saw its stock price surge 500% in one year.

Global banks are increasingly scrutinized for business dealings with fossil fuel companies, and shareholders continue to increase pressure. Last week, at the Securities and Exchange Commission (SEC), Citigroup lost a request to block a shareholder proposal demanding the bank "cease lending and acquisitions for new fossil fuel supply."

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