News this week that the Norwegian Global Pension Fund (GPF), the world’s largest sovereign wealth fund and one of the largest investors in the coal industry, divested from over 50 coal companies in 2014 has come with some unfortunate caveats attached.
While GPF’s ditching of a number of major companies involved in devastating mining practices – in particular the mountain-top removal exponents Arch Coal and Alpha Natural Resources – and notorious giants such as Coal India are very welcome and timely steps, these coal divestment advances were immediately compromised by the fund revealing the state of play with its other fossil fuel interests: in 2014 it increased its stake in major oil and gas companies to £20 billion.
Moreover, as BankTrack partners urgewald have pointed out in a rapid-fire analysis of the GPF’s new holdings list, in real money terms the divestment achieved by dropping 53 coal companies amounts to NOK 7.7 billion (roughly €1 billion), and half of this sum has been used to either top up existing coal holdings or been invested in new coal companies. Our colleague Heffa Schücking, director of urgewald, has again stressed the need for a clear set of exclusion criteria in order to eliminate large parts of the coal sector from GPF’s portfolio.
Nevertheless, for one of GPF’s coal casualties, the main Indian power company National Thermal Power Company (NTPC), public disclosure of Norwegian divestment comes at a very significant moment.
Only a few weeks ago, a tender for the massive 1,320 megawatt Rampal coal-fired power plant project in Bangladesh was issued by Bangladesh-India Friendship Power Company Ltd (BIFPCL), a joint venture between NTPC and the Bangladesh Power Development Board (BPDB). BIPFCL is now looking for international financing – thought to be in excess of $1 billion – for the Rampal project.
GPF’s pull-out from NTPC, involving a stake valued at $56 million, stems from tough, unequivocal recommendations issued in December last year by Norway’s Council on Ethics in its annual report: “there is an unacceptable risk that NTPC will contribute to severe environmental damage through the building and operation of the power plant at Rampal, including related transportation services.”
In language that should be triggering serious alarm bells within other financial institutions – including commercial banks – about Rampal’s likely irreversible environmental impacts, the Council also judged that “it is highly unlikely that a coal-fired power plant can be constructed at this location without the construction itself constituting a high risk of severe environmental damage, even if extensive additional measures are implemented. In the present case, the company has also failed to give sufficient consideration to what needs to be done to protect the environment.”
Why the alarm?
The Rampal coal-fired power plant, a BankTrack ‘Dodgy deal’, would be located next to the Sundarbans, a UNESCO World Heritage Site extraordinarily rich in biodiversity and the single largest mangrove forest in the world. According to several published studies, the impacts of Rampal would be mostly negative and irreversible. These show that climate, topography, land use pattern, air and water quality, wetlands, floral and faunal diversity, fisheries and tourism would be affected permanently due to the proposed power plant.
The Sundarbans mangrove forest is also a critical natural defence against cyclones – and, of course, Bangladesh is one of the nations most vulnerable to the effects of climate disruption. This means that Rampal would not only contribute to the climate disruption threatening Bangladesh, but that it will also endanger the country’s main protection against it.
Bizzarely, and perhaps a reflection of the wishful thinking underpinning the development of the project, the Rampal environment assessment claims that cyclones would help to blow away sulphur dioxide and nitrogen dioxide waste from the plant.
The project is facing strong opposition both locally and nationally. A 250 mile ‘Long March’ in September 2013 from the capital city, Dhaka, to the city of Rampal attracted 20,000 Bangladeshis demanding the scrapping of the plant.
The Norwegian Pension Fund’s decision to pull-out of Rampal was underscored by the dramatic oil spill that impacted Sundarbans in December when a cargo vessel carrying about 350,000 litres of furnace oil, collided with another vessel and sunk along the Shela River. Local communities and environment have barely been able to cope with the spill’s impact, and additional transportation and infrastructure linked to the operation of Rampal would add severely to the strain.
Test case for banks
Now that Rampal is reaching the financing stage, it has become a test case for international banks to prove that they will abide by their commitments to help combat climate change and decline investing in a dodgy coal deal as extreme as this one. Choosing not to name any potential funder names, the managing director of the Rampal power plant, Vijay Sanker Tamrakar, was recently quoted as saying: “We have been in negotiation with many interested financers for the project,” with June this year apparently the projected funding deadline.
The banks should follow the lead of the Norwegian GPF and publicly commit to not financing a climate disruptive project and help protect Sundarbans and its people.