Commerzbank has issued a new policy for fossil fuels with the goal of forcing the coal phase out by 2030 and pushing forward the sustainable transformation of the real economy.
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“With the new policy, we are taking another major step towards net zero. We are underscoring our commitment to channelling investment flows towards the Paris climate target and pushing ahead with the transformation. This is also demonstrated by the fact that we have reduced our coal portfolio by half in just two years,†says Manfred Knof, Chairman of the Board of Managing Directors of Commerzbank.
Currently the coal portfolio amounts to approximately €1bn. This corresponds to around 0.2% of the Bank’s total portfolio.
When the policy comes into force on 1 January 2022, the upper limit for companies with ties to the coal sector will be substantially reduced and globally harmonised. Existing clients that currently use coal to generate 20% or more of their sales or power production have time until 2025 to draw up a plan for an exit from coal no later than 2030.
To this end, Commerzbank will enter into an intensive exchange with its clients. Moreover, Commerzbank will not commence new business relationships with companies that generate more than 20% of their sales or power production with coal. The same applies to potential new clients planning to expand coal related activities.
Project financing is limited exclusively to necessary modernization of existing coal fired power stations and is subject to a critical assessment of each case. This represents a significant tightening of the Bank’s disqualification criteria. Previously, a cap of 30% or, internationally, of 50% applied.
The news policy also refers to business with companies from the oil and gas sectors. Starting on 1 January 2022, this will be covered by a mandatory policy for the first time: existing business relationships in these sectors will be subject to regular reviews in terms of environmental and social criteria.
In addition, Commerzbank will not enter into new business relationships with companies planning to expand oil and gas activities. In general, Commerzbank will not provide financing for new oil fired power stations or oil and gas extraction projects. This applies to both conventional and unconventional extraction methods. ■