Citigroup and other firms attempted to launch a fund that would purchase coal mines and close them by 2040, according to The Wall Street Journal; however, the project was allegedly abandoned upon several rejections from investors.
The Wall Street Journal reported:
The bank teamed up with commodities trader Trafigura Group Pte. Ltd. and Resource Capital Funds, a private-equity firm, to pitch an investment vehicle earlier this year known as Coal to Zero. The fund planned to buy mines in the U.S., Australia and South Africa and run them with the promise of shutting them down by 2040, according to people familiar with the matter and a marketing document seen by The Wall Street Journal.
The fund was trying to solve a thorny problem in the green-energy world. Some energy and mining companies have divested coal assets under the pretense of cutting carbon emissions or appeasing shareholders, only to sell them on to owners happy to run them indefinitely. The fixed end date was a compromise.
In addition to the early shutdown plan, the fund would have kept 75% of its coal in the ground. The Wall Street Journal adds that investors were reportedly uneasy with the project:
Some pension funds and other potential investors balked at the investment vehicle because they didn’t want to face criticism for investing in fossil-fuel projects despite the fund’s goal of accelerating the retirement of coal mines, according to some of the people familiar with the matter. The group’s failure to bring financial backers on board demonstrates how taboo thermal coal has become in the investment world.
Another challenge stemmed from fast-moving changes of direction from governments about the future of coal in the energy mix, some of the people said. Germany’s new government, for example, recently said it aims to bring forward the country’s target for shutting coal power plants to 2030 from 2038. This made it difficult to finalize retirement dates for mines and set the fund’s financial objectives.
Indeed, the White House’s emphasis on clean energy projects — and its attempts to stem nonrenewable energy production — has led American investment banks to grow hesitant over coal projects. In a recent letter, the financial officers of 16 Republican states announced that they would “be taking collective action in response to the ongoing and growing economic boycott of traditional energy production industries by U.S. financial institutions.”
“As the Obama Administration’s War on Coal demonstrated, reckless attacks on law-abiding energy companies cut off paychecks for workers and take food off the tables of hard-working families,” said the officials. “The Biden Administration has resumed these attacks by attempting to ban energy exploration on public lands and reportedly pressuring U.S. banks and financial institutions to limit, encumber, or outright refuse financing for traditional energy production companies.”
“We have a compelling government interest, when acting as participants in the financial services market on behalf of our respective states, to select financial institutions that are not engaged in tactics to harm the very people whose money they are handling,” the letter continued. “Further, we have the responsibility, as fiduciaries and stewards of more than $600 billion, to ensure that our financial service providers are free from harmful conflicts of interest that could jeopardize state funds.”
“Any financial institution that has adopted policies aimed at diminishing a large portion of our states’ revenue has a major conflict of interest against holding, maintaining, or managing those funds.”
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