A worker in a coal mineA worker in a coal mine. © Greenpeace / Peter Caton

Can a bank claim to be green at heart, in favour of environmental sustainability and advocate for the transition to a low carbon economy while continuing to fund Coal India, one of the worst environmental criminals in India? That, in effect, is the question Greenpeace has posed to a slew of big banks, Citi, Bank of America and Goldman Sachs among them, together with our allies at Rainforest Action Network.

Coal India’s much delayed and seemingly jinxed share offer is finally moving, with the government inviting bids from merchant bankers and brokers to assist in the share sale. The government has already reduced the sale from 10% to 5% of Coal India shares, in an ill-fated bid to buy the support of CIL’s trade unions. The unions have opposed the government’s divestment fearing that an increase in foreign ownership could lead to a loss of jobs, harsher working conditions and lower benefits. They have also cited a promise from this government that it would not seek to divest more shares for the rest of its term – a promise the government is now breaking.

Citi, Bank of America and Deutsche Bank are among the multinational banks pondering bids to be the merchant bankers for the share sale, which could be valued at Rs. 8,400 crore (approx $1.4 billion). Each of these giant banks claim to be guided by environmental and sustainability policies. Yet all three of them were underwriters for Coal India’s 2010 IPO.

As anyone familiar with Coal India will know, there is nothing environmentally friendly or sustainable about their operations. Not only do they produce coal, which kills thousands of Indians every year, they do so by the most destructive method possible - open pit mining - invariably in forested areas, displacing tribal communities and destroying biodiversity, including endangered species like the tiger and elephant. There are shocking reports of child labour in some Coal India operations, showing that CIL’s internal governance mechanisms are seriously flawed.

n open-pit mine in Singrauli, Madhya PradeshAn open-pit mine in Singrauli, Madhya Pradesh. © Greenpeace / Sudhanshu Malhotra

So Greenpeace is challenging these big banks to walk the talk. And if ethical and environmental reasons aren’t enough, there are serious financial risks that Coal India poses to any investor. The company’s stock price has nosedived and it is now almost at its original levels after the 2010 IPO. Despite lofty claims, production continues to lag far behind demand, with targets being missed on a regular basis. The government, which will remain the majority shareholder, has been keeping coal prices artificially low even as cost of production increases, meaning that the share price is likely to remain under downward pressure.

The problems faced by coal are not singular to India, but are part of a larger global shift. Goldman Sachs itself has predicted that coal is going to be eroded by environmental regulations, renewable energies and energy efficiency, warning that the window for profitable investments in coal is rapidly closing.

So what will Bank of America, Citi and Deutsche Bank do? Will they demonstrate their commitment to a more sustainable, low carbon economy, or will they show that money trumps morality yet again?


Ashish Fernandes is a campaigner with Greenpeace.