Activist group urges CIMB Group to stop lending to Adaro Energy

CIMB Group has a public position of embracing the urgent transition to RE, but this is in clear contradiction of the bank’s ongoing funding for coal

by ANIS HAZIM / pic credit:

A GROUP of Asian organisations has called on CIMB Group Holdings Bhd to stop lending to Indonesian coal mining giant PT Adaro Energy Indonesia Tbk in line with its commitments to meet global climate goals, but the Malaysian banking group has defended its position.

CIMB Group has a public position of embracing the urgent transition to renewable energy (RE) but this is in clear contradiction of the bank’s ongoing funding for coal, said Nabilla Gunawan, the Indonesia campaigner at Aussie-based activist group Market Forces.

“CIMB Group must act in the best interests of its customers and a safer climate by ruling out all finance for Adaro Energy and its companies, in line with its coal exclusion policies,” she said in an email.

Market Forces believes that the banks, superannuation funds and governments that have custody of people’s money should use it to protect not damage the environment.

The Aussie group said that in April 2021, CIMB Group took part in a US$400 million (RM1.85 billion) lending syndicate to Adaro Energy’s thermal coal mine subsidiary and that CIMB Group also published a policy in June 2022 restricting its investment in greenfield thermal coal mines.

When asked to respond, CIMB Group said it has not provided any new financing in contravention of its coal policy in December 2020, which included its target to phase out coal from its portfolio by 2040.

In the statement, CIMB Group did not make specific mention of Adaro Energy, the Indonesian coal miner and Indonesia’s second-largest producer of thermal coal.

CIMB Group said it is committed to advancing sustainable practices across all the sectors it is involved in through its financing and capital raising activities, adding that the group has put in place policies and guidelines to manage environmental and social risks at the client and transaction level, including sector guides for high sustainability risk sectors.

“The group has since also strengthened its commitment in this area by setting an interim target of halving its financing and investment exposure to the thermal coal mining sector by 2030, towards achieving the complete coal phase-out target by 2040.

“This interim target is in alignment with the Paris Agreement’s goal of limiting global temperature increase to 1.5°C, and will also support the group’s commitment to achieving net-zero greenhouse gas emissions, including Scope 3 financed emissions, by 2050,” it said in the email to The Malaysian Reserve. However, the response did not cut ice with the activist group.

“CIMB Group’s failure to directly answer the question of financing Adaro Energy is disappointing when its peers and other former lenders have clearly ruled out additional funding to this coal mining company,” Market Forces ED Julien Vincent said in an email.

He said Adaro Energy’s business strategy includes increasing the production of thermal coal, clearly undermining the goals of the Paris Agreement and net-zero emissions by 2050.

“Communities affected by Adaro Energy’s coal mining expansion plans want to know whether CIMB Group will endorse such climate and environment-damaging activities.

“While Adaro Energy’s business plans are oriented towards an increasingly hotter Earth, we find it entirely inconsistent that CIMB Group should finance this company. CIMB Group should rule out further financing to Adaro Energy until it ends its coal mining expansion plans and commits to phasing down coal production in line with the Paris climate goals,” he said.

According to Adaro Energy’s annual report 2021, it was exploring new coal through one of its subsidiaries. In 2021, Adaro Energy derived 96% of its revenue from coal and its mid-September 2022 statement that it has no intention to reduce its coal business, according to Market Forces.

Adaro Energy has developed into a vertically integrated organisation, with pit-to-power subsidiaries including mining, barging, ship-loading, dredging, port services, marketing and power generation, according to information on its website. The company operates the largest single coal mine in the country (in South Kalimantan) and aims to be an integrated coal mining and energy group in South-East Asia.

This article first appeared in The Malaysian Reserve weekly print edition