An international team of environmental and financial experts claim in a report that contrary to declarations it made in 2013, the World Bank (WB) has been indirectly funding coal mining projects in Asia.
According to the report, published on 11 April, the WB’s private-sector arm – the International Financial Corporation (IFC) – has been financing through intermediary banks Kaltim Prima Coal, one of the world’s largest open-pit coal mining operations, located in East Kalimantan, Indonesia.
Authored by Mining Advocacy Network (abbreviated as JATAM), Inclusive Development International and the Bank Information Center (BIC), Europe, the report follows the release of a documentary film last 5 April entitled The Sexy Killers produced by the NGO Watchdoc. The documentary shows coal mining companies backing the election campaigns of Indonesian presidential candidates.
“Now we know that the powerful industry is not only backed by political elites but also funded by foreign banks. The poor will always lose in this game,” says Melky Nahar, who leads the JATAM campaign.
According to JATAM’s impact assessment, the project in Kalimantan dumped heavy metals into local rivers, destroyed fresh water sources, diminished crop yields and forced the Dayak Basap tribe to abandon their ancestral lands.
In 2013, then WB president Jim Yong Kim declared that his organisation would no longer fund Asia’s coal industries. But the new report finds the world’s largest organisation for leveraged loans in developing countries routing funds to Indonesian coal companies through the IFC.
The report says IFC involved two financial intermediaries to fund Kaltim Prima Coal. In January 2014, IFC bought US$186 million worth of shares in Raiffeisen Bank International, Austria, which in turn provided US$80 million credit to Bumi Resources, a company which owns 51 per cent of Kaltim Prima Coal shares.
Furthermore, according to the report, IFC financed Kaltim Prima Coal via the Axis Bank of India. The bank was found to finance Bhira Investment Limited, the owner of 30 per cent stakes in Kaltim Prima Coal. Bhira is the subsidiary company of India’s Tata Power Company which is now developing the controversial Mundra power plant project in Gujarat, India. The project also consumes coal derived from Kaltim Prima Coal.
An IFC spokesperson denied the charges made in the report and said the investment provided to Raiffeisen Bank in 2014 was given on condition that it would go to its subsidiaries in Bosnia, Kosovo, Poland and Russia, and not Indonesia. “IFC adheres to the 2013 World Bank Group energy strategy which prevents direct financing of coal-related projects by the Group.”
In response to the findings, the IFC has unveiled a draft plan called the Green Equity Strategy designed to move its client banks away from financing coal and toward renewable energy.
“The IFC is taking welcome steps to address the harms in its financial-sector portfolio, including pledging to reduce coal exposure to zero and help its clients step away from coal. The IFC influences over US$4.5 trillion of investments in emerging markets, so these moves signal the beginning of the end for coal,” says Kate Geary, co-director of the Bank Information Center.
“BIC will be watching closely for any loopholes which allow this dirty financing to continue,” Geary adds.