Swiss banks – six years of hypocrisy

“I look at the room; I see that the reaction is positive; I do not hear any objections. The Paris Agreement on climate is accepted.” It is 12 December 2015. These are the words that the president of COP 21, Laurent Fabius, used to seal the adoption of the first global climate agreement. Some 196 states committed to reduce their greenhouse gas emissions, with the aim of limiting global warming to a maximum of 2°C by the end of the century, compared to pre-industrial levels, and even to continue the effort to limit the increase to 1.5°C.

Among the signatories, the United States (that later broke ranks under the presidency of Donald Trump) and Switzerland committed, upon ratification of the agreement in October 2017, to reduce their CO² emissions by half by 2030, compared to 1990 levels. “Switzerland is on the right track to implement the Paris Agreement”, boasted the Federal Office for the Environment on its website. The Swiss population (and most of the cantons) nevertheless dismissed the revision of the law on CO², which was due to validate the reduction commitments made in Paris. And its banks continue to operate as if nothing had happened, despite their grand commitments to becoming carbon neutral.

According to Public Eye’s investigation, drawing on data from the Dutch research agency Profundo: since the Paris Agreement, Swiss banks have lent nearly USD 3.15 billion to the Swiss coal industry. Financing of the coal trade has even accelerated since 2016, if 2021 is omitted in light of the slowdown in growth caused by the Covid-19 pandemic. From 2016 to 2020, the annual sums raised by coal producers and traders increased by 72 percent. None of the banks in question wished to comment on the figures provided by third parties.

Swiss banks occupy tenth place globally as creditors of coal: In the time between the Paris Agreement and September 2022, the Swiss coal industry raised a total of USD 72.9 billion from banks in France, Japan, the US, Russia and other countries (see the table below).

Invisible finance

In another trend, financing is increasingly being provided through bond issuance organised by these same banks. It’s an instrument that enables companies to borrow money from investors without the investors acquiring a share of the company, as is the case with share purchases. This practice is known as “underwriting” and enables financial institutions to avoid including coal in their accounting statements, as they would be obliged to do in the case of a bank loan. “The bond only passes through the portfolio of the bank that will place it with investors. This dilutes the link between the financial institution and the mining company, and makes it possible to obtain remuneration following the issuance” confirms Lucie Pinson.

Faced with pressure from environmentalists, the finance sector is reorganising to become more discreet. “The higher the reputational risk posed by a project, the more it becomes practical to finance the company rather than the mining project”, maintains the founder of Reclaim Finance. “No bank is crazy enough to associate its logo with the inauguration of a coal-fired power plant”. From 2016 to 2021, underwriting grew by nearly 246 percent.

During this period, on 15 November 2021 at COP 26 in Glasgow, Switzerland – represented by its Minister for Environment and Energy Simonetta Sommaruga – denounced China and India’s move to torpedo a departure from coal. For OECD countries, the UN conference on climate change has just set objectives for 2030. 2030, that’s tomorrow – and nothing indicates any reversal of the trend.

Right to the last piece of coal

The sector thought it had found the solution to fend off divestment by large European banks – code name “Coal to Zero”. Specifically, the idea is to create a fund to continue financing mining projects, under the guise of undertaking “responsible extraction” of coal up to 2040 or 2045, dates at which the industry promises to pull the plug. The project was initiated by the Geneva-based trading house Trafigura and the financial institution Citigroup, which has a branch in Geneva. It sought financiers prepared to continue with the adventure of this sedimentary rock, according to documents intended for London-based investors consulted by the Bloomberg news agency, which revealed the affair in May 2021. Part of the funds would be spent on local communities, with no further specification provided. The rest was dedicated to the acquisition of coal mines in Australia, the United States or South Africa.

In reality, the initiative is an old idea that comes up time and again. “I support the idea of a 'bad bank' that invests in the production of fossil fuels, coal and gas-fired plants”, states the trader Lars Schernikau. “Western companies are forced by investors to divest. For the environment, it is better that someone other than the Chinese are in charge of extraction. The direct consequence is that coal will become even dirtier and energy efficiency will be lost. The restrictions on coal will end up benefitting the small number that continue to profit from the trade.”

According to the Wall Street Journal, the two companies abandoned the idea in December 2021. Contacted by Public Eye, Trafigura’s representative cited “positive feedback” from investors and certain affected communities. However, the representative confirmed that the idea had been rejected “given the uncertainties of a rapidly evolving regulatory environment and the varying priorities of key stakeholders”.

1. Lucie Pinson, quoted in Mickaël Correia, Criminels Climatiques [Climate Criminals], Ed. La Découverte, 2022, page 106.