Coal Phase-Out Guideline
The only way to deal with coal is to leave it underground.
Financial institutions can tackle climate change and manage the stranded asset risk and financial soundness through coal-exit policies.
We introduce globally recognised the Global Coal Exit List (GCEL) standard developed by German NGO Urgewald.
Determine the scope of the coal industry.
- Projects related to the development of coal mines including coal mining, production and processing
- Projects associated with the construction and operation of transportation infrastructure such as railways or ports for coal shipment and distribution
- Projects regarding the manufacturing, construction and operation of facilities associated with coal consumption such as coal-fired power generation, liquefaction or gasification.
To make an impact, companies need to define the scope of the coal industry to cover the entire coal value chain ranging from production, distribution to consumption of coal including coal-fired power plant projects and establish their exclusion policies based on such definition.
Define coal companies.
- Businesses with over 20% of their power production from coal-power generation
- Businesses with over 20% of their revenue from coal-related activities
- Companies with the coal power generation capacity of over 5GW
- Mining companies with the annual production capacity of over 10 million tonnes
- Businesses that are currently developing coal mines (with the annual production capacity of over 1 million tonnes)
- Businesses that are currently developing coal-fired power plants (with the capacity of over 300MW)
- Businesses that are currently developing coal-related infrastructures
If a company meets any of the three criteria mentioned above, it should be classified as a coal company and hence excluded from investment.
Establish the threshold for investment exclusion.
- Various types of loan financing and financing arrangements including project financing
- Corporate bond
- Securities investment
- Refinancing for existing investments
- Underwriting for coal-fired projects
Negative screening should be adopted to limit investment in coal companies through all types of financial instruments and schemes such as project financing, and securities or corporate bond investment.