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Private Finance

Private Finance

More and more financial institutions recognise the business case for moving away from coal. With renewable energy increasingly becoming more economical than coal, continued investments in coal power pose the risk to investors of being left with cumbersome, costly and polluting stranded assets on their books. Despite this positive trend a significant amount of investment, from private and public sources, is still being made in unabated thermal coal power around the world.

To meet the Paris Agreement commitment to pursue efforts to limit global temperature increase it to 1.5°C, analysis shows that coal power phase-out is needed by no later than 2030 in the OECD and no later than 2040 in the rest of the world (‘PPCA Timeframes’). 

Through the PPCA Finance Taskforce launched in June 2020 and underpinned by the PPCA Finance Principles, finance sector members, government members and partners of the PPCA are working together to:  

  • cease new investments in coal-fired power, 
  • phase out existing coal capacity, 
  • boost investments in clean energy. 

Over 70 private sector organisations are members of the Alliance. They span the globe, from North and South America to Europe and Asia-Pacific, and include 34 private finance institutions accounting for over USD$17 trillion in assets. Membership of the PPCA offers them an opportunity to showcase their leadership in climate action, the clean energy transition, and increases their influence at the global scale. 

The PPCA Finance Principles 

The PPCA Finance Principles, to which financial institutions commit when joining the Alliance, guide the work of the Finance Taskforce. Launched in 2019, they represent a clear and comprehensive statement of how to fully align coal power-related financial services and investments with the goals of the Paris Agreement, complementing the work of Climate Action 100+ and The Investor Agenda. 

The Finance Principles also give greater clarity to the role of financial institutions in advancing the objectives of the PPCA; help align financial services and investments with the Paris Agreement; build upon and complement the accounting and transparent reporting of climate risks by member organisations; and complement responses to the guidelines proposed by the Taskforce for Climate-Related Financial Disclosure (TCFD). 

In addition to supporting the PPCA Declaration, financial institutions (as applicable [4]) as members of the PPCA commit to: 

Financial Services

  • No project specific financing or wider financial services for new unabated coal-fired power plants, and no project specific refinancing or wider financial services for existing unabated coal-fired power plants that would result in their operation beyond PPCA Timeframes.
  • No new provision of financial services to companies that would result in the building of new unabated coal-fired power plants or that would be used specifically towards the generation of electricity from unabated coal beyond PPCA Timeframes.
  • Advocate for a credible public commitment to the phase-out of unabated coal power within PPCA Timeframes, by companies to which existing financial services are being provided.

Investments

  • Offer or select new products (or bespoke mandates), or make new direct investments, that avoid exposure to equity and debt instruments of companies that plan to generate electricity from unabated coal beyond PPCA Timeframes.
  • Advocate for relevant companies to seek alternatives to new unabated coal-fired power plants and advance a credible public commitment to the phase-out of unabated coal power within PPCA Timeframes, including via global initiatives like Climate Action 100+.
  • Encourage recognised investment information providers to track which companies own unabated coal-fired power plants, with an initial focus on tracking plans to build new unabated plants globally and phase-out dates for unabated plants located in the OECD.

Reporting

  • Report policies and progress on a ‘comply or explain’ basis when responding to TCFD or similar annual reporting frameworks.

Promoting the PPCA

  • Encourage others to take action on coal power phase-out and promote the PPCA, including when providing advisory services or technical assistance to relevant clients.
  • Share expertise with those financial institutions still engaged in coal power financing activities.

[1] Unabated’ refers to coal power generation without any technologies to substantially reduce CO2 emissions, e.g. operational carbon capture and storage.

[2] Financial services include lending, underwriting, advisory and insurance services. Investments include direct investments and investments through third parties.

[3] Financial institutions include banks, insurers and investors.

[4] Commitments will depend on business model.

PPCA Finance Expert Group 

Through the PPCA Finance Taskforce launched in 2020, finance and government members and partners of the PPCA work jointly to cease new investments in unabated thermal coal-fired power, phase out existing coal capacity and boost investments in clean energy. Expert Group members engage in thought leadership on thermal coal phase out, including on joint advocacy among policy makers and businesses, engagement with utilities, shifting financial flows from coal to clean energy and ensuring net-zero transition plans include the appropriate metrics and targets for coal phase-out. This is done in partnership with existing initiatives such as Climate Action 100+ and The Investor Agenda

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