German Banks' Coal Links Scrutinized as Divestment Drive Grows

  • Report says banks invested 8.7 billion euros in lignite plants
  • Commerzbank reviewing its position on coal investments

German lenders with holdings in conventional power generation are being asked to justify the investments as companies like Allianz SE switch funds into cleaner forms of energy.

Europe’s biggest insurer said Tuesday it will reduce its coal investments and double its spending in renewables from about 2 billion euros ($2.1 billion). The move is a gesture of support to the Paris climate talks next week and to “send a signal to our branch and to capital markets,” said Allianz’s Chief Investment Officer Andreas Gruber in a ZDF television interview.

Allianz’s announcement adds to pressure on German lenders and investors to examine exposure to coal after Economy and Energy Minister Sigmar Gabriel said the nation will close all of its lignite plants, which supply about a quarter of German power. Germany’s biggest banks including Deutsche Bank AG, Commerzbank AG as well state lenders like BayernLB retain direct and indirect investments in lignite valued at 8.7 billion euros, the Urgewald climate lobby group said in a report.

“We are now thinking about our position about coal,” Frankfurt-based Commerzbank spokesman Martin Halusa said in an interview after Allianz published the report from Urgewald. Commerzbank has about 3 billion euros linked to lignite, according to Urgewald. Halusa declined to be more specific. State development bank BayernLB said loans and other investments in both coal would be retained to stabilize the grid until supplies from cleaner forms of generation take hold.

‘Bridge Technology’

Fossil-fuels are “a bridge technology with an essential role to play in supplying energy security in the short short- and medium-term,” BayernLB said by e-mail. The bank views “an energy industry that treats resources sparingly and in harmony with the climate as essential.”

Franziska Roederstein, a spokeswoman for BayernLB in Munich, declined to comment. The report also said the lender has loans and other indirect exposure to lignite of 834 million euros.

Allianz is following the lead of other asset managers that have recently put their fossil-fuel investments into question. Norway’s $900 billion wealth fund was banned by the country’s parliament from coal investments in May and BlackRock Inc. said in October that it may convert an existing fund that would eliminate client exposure to fossil-fuel assets.

Paris Conference

While the German government said it is counting on a “robust architecture” of pledges to cut carbon pollution to emerge from the Paris talks, it may be sending mixed signals to investors and lenders on its “Energiewende” or energy switch policy.

Clean energy this year added up to 33 percent of all power consumed in Germany, yet resistance is increasing, led by utilities and unions, to slow down its expansion amid fears over energy security and job losses in conventional generation.

RWE, Germany’s biggest power producer, is having trouble attracting investors, Chief Executive Officer Peter Terium said in a Nov. 23 interview in the Frankfurter Allgemeine Zeitung. “We need money to grow. At the moment we’re not getting it,” said Terium.

European coal prices have plunged to their lowest level in at least eight years, according to data compiled by Bloomberg.

Shares of RWE have slumped 58 percent this year as it struggles to rebalance its power mix amid the country’s policy shift toward renewable energy. More than 40 percent of the company’s power-generation capacity is based on hard coal and lignite, according to figures posted on RWE’s website in November.

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