Goldman Sachs, which won applause from environmentalists for its 2019 pledge to curb fossil fuel financing, is under fire over a $150mn loan last week to Peabody Energy, the world’s biggest private sector coal producer.
The deal, arranged to shore up Peabody’s derivatives positions amid the market turbulence triggered by Russia’s invasion of Ukraine, highlighted the ambiguity of Goldman’s initial pledge to phase out financing for thermal coal mining companies, environmentalists said. In 2019, the bank said it would only support companies shifting away from coal at a reasonable pace.
Goldman’s 2019 coal pledge was considered the strongest adopted by any big US bank, said the Rainforest Action Network, a San Francisco-based environmental non-profit.
But now the Peabody deal “demonstrates how vague and therefore non-committal the [bank’s] policy is,” said Alison Kirsch, a policy and research manager at RAN.
As the sole bank on the Peabody deal, Goldman “does not look like [it] is getting out of coal,” she said.
Goldman Sachs declined to comment.
Since 2019, other banks have gone further in limiting deals with coal companies. In December, HSBC said it would phase out thermal coal financing in the EU and OECD countries by 2030. A global phase out of coal would be finished by 2040, HSBC said.
For Goldman, “the main issue here is how vague coal policy is,” said Yann Louvel, a senior policy analyst at Reclaim Finance, a non-profit group affiliated with the Friends of the Earth. The bank has wriggle room “open to internal interpretation by the bank, which makes it difficult to prove a clear breach of the policy,” he said.
Peabody said coal derivative contracts it entered into in 2021 were hammered by the surge in coal prices and that the company was hit with a $534mn margin call, prompting the need for the Goldman loan. Shares in Peabody, which owns stakes in 17 active coal mines in the US and Australia, are up 500 per cent from a year ago.
Global banks have come under increasing scrutiny for their business deals with fossil fuel companies — and shareholders have continued to ramp up pressure. Citigroup last week lost a request at the Securities and Exchange Commission to block a shareholder proposal demanding the bank halt lending and underwriting for new fossil fuel supplies.
“A $150mn loan to a coal company that doesn’t violate Goldman’s supposedly ambitious climate policy should be all the proof we need that Wall Street banks can’t be left to their own devices to fix their climate problem,” said Adele Shraiman, the campaign representative for the Sierra Club’s Fossil-Free Finance campaign.
Additional reporting from Joshua Franklin and Eric Platt
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