Lending to coal mines

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Australia is the world’s biggest coal exporter, digging up hundreds of millions of tonnes each year. If our national carbon footprint were calculated including emissions from exported coal, it would almost triple.

As well as driving dangerous global warming, coal mining also creates local environmental havoc, including the destruction of forests and farmland, reduced water availability and quality, and toxic air pollution.

We have identified over $11 billion worth of loans to the Australian coal mining sector since 2008, with $3.7b coming from the big four banks.

Top lenders to coal mining in Australia 2008-2016

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Maules Creek is a 13 million tonne per year coal mine that its owner, Whitehaven Coal, is planning to have exporting coal out of Newcastle by then end of 2015. It was financed by a $1.2 billion loan in December 2012, led by ANZ. All four major Australian banks contributed to the loan, with ANZ contributing $325 million and Commonwealth, NAB and Westpac $100 million each.

Maules Creek december 2013

Since August 2012, a community presence at Maules Creek has hampered Whitehaven Coal’s ability to construct the mine and it is now unclear whether they will meet their deadline to start exports. Community groups, religious leaders, health professionals, farmers, former employees of mining and government, and traditional owners have all worked hard to resist the mine’s construction.

At ANZ’s 2013 Annual General Meeting, activists, shareholders, farmers and traditional owners attended to raise questions of ANZ’s lead role in Maules Creek. It led to the ANZ Chairman shutting down questions, including from traditional owners who had travelled 700 km to be at the meeting in Brisbane.Read more about ANZ’s AGM to remember here.

But some unhappy locals and activists at their AGM are likely to be the least of ANZ’s worries. With a falling coal price and the risk of Maules Creek not commencing on time, ANZ and other lenders to Maules Creek risk losing out as the company struggles to move coal out and earn enough to cover the loan’s interest. If nothing else, Maules Creek will be a major lesson to investors about the increased risks in coal mine lending.

Despite the extreme environmental threats posed by coal mining and combustion, as well as clear signs that demand is falling internationally, there are proposals on the table to roughly triple Australia’s coal exports, requiring tens of billions of dollars in further investment. The best known of these is Adani’s Carmichael mega coal mine, proposed to be built in Queensland’s Galilee Basin.

If the Galilee Basin is opened up it would double Australia’s coal exports on its own, and account for 7% of the entire world’s remaining carbon budget under a less than two degrees warming scenario. While the environmental stakes are in the extreme, so are the financial risks. With the Galilee Basin so far from existing coal export infrastructure and many finance and commodities analysts forecasting the downward trend in coal demand to continue, there is a very real risk that the Galilee Basin coal mines would become multi-billion dollar stranded assets.

So far, 24 banks have ruled out lending to Adani’s planned Carmichael coal mine, either explicitly or through policies that restrict lending to coal mines. Years of community pressure has ensured none of Australia’s big four banks will lend to the project. But the mine remains a major threat, and there are many companies that could help Adani tear the heart out of the Galilee. Click here to find out more and take action.

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