Bank of America walks back all those pious vows to not lend to coal companies

Truly, the stupidest thing out there from the green movement is not the soup-throwers at the museum paintings, not the desert road blockers with the bright idea of tangling with Indian tribal police, but the dolts who cut off their own noses to spite their faces, vowing to never lend to coal, fossil fuel or other legitimate investments because they aren’t politically pure enough.

They lose money on this kind of virtue-signalling … and it’s their own money.

Which brings us to wokesterly Bank of America.

According to the Daily Caller:

Bank of America appears to be backtracking on its late 2021 pledge to cease financing new coal and Arctic initiatives, based on company documents.

Bank of America had committed to terminate its direct funding of coal mines, coal-fired power plants and arctic drilling, according to its December 2021 “Environmental and Social Risk Policy Framework.” However, its December 2023 revised version updates the bank’s pledge to exercise “due diligence” with these initiatives rather than an outright refusal to finance, as first reported by The New York Times on Saturday.

So divesting from fossil fuels and Alaska development lending wasn’t such a smart idea after all.

According to the New York Times:

Bank of America said in a statement that clients or transactions “that carry heightened risks will continue to go through an enhanced due diligence process involving senior level risk review.”

In late 2021, the bank’s policy stated that it “will not directly finance new thermal coal mines or the expansion of existing mines” or “petroleum exploration or production activities in the Arctic.” It also would not “directly finance the construction or expansion of new coal-fired power plants, including refinancing recently constructed plants” unless those facilities employed carbon capture or similar technology.

Coal, a major contributor to global warming, faced “significant challenges” as the world stepped up its efforts to address the climate crisis, the bank said at the time. Moreover, Bank of America said it recognized that “the Arctic is a unique region with specific considerations to take into account including those of marine and wildlife, a fragile ecosystem and the rights of Indigenous Peoples.”

That language is gone from its updated policy.

The Times blamed “intensifying backlash” from Republican lawmakers for companies that employ E.S.G. (environmental, social, governance) criteria to their loans to businesses. The Times also blamed Texas, New Hampshire, and West Virginia for passing anti-discrimination laws targeting corporate E.S.G. discrimination practices and said many banking bigshots were pulling away.

Some of that may be true in Bank of America’s case, but it’s always best to follow the money.

What’s going on with that bank? 

According to MarketWatch:

Bank of America Corp. stock underperforms Thursday when compared to competitors

Shares of Bank of America Corp. BAC, -0.24% slid 1.35% to $33.55 Thursday, on what proved to be an all-around favorable trading session for the stock market, with the S&P 500 Index SPX, +1.07% rising 1.25% to 4,906.19 and the Dow Jones Industrial Average DJIA, +0.35% rising 0.97% to 38,519.84.

This was the stock’s second consecutive day of losses.

Bank of America Corp. closed $3.45 short of its 52-week high ($37.00), which the company reached on February 7th.

All that wokesterism, all that virtue-signalling, and they aren’t doing as well as their less-woke rivals.

How’s lending going over in the coal industry and in the Arctic?

Here’s an authoritative source, the Investor’s Business Daily Industry Snapshot for the coal industry, published last October (full disclosure: I used to write these snapshot studies myself years ago when I was at IBD):

The once-mighty U.S. coal industry, it has been said, is on the back foot and entering its final act — doomed by legislation aimed at curbing climate change, by ESG standards and by falling costs of cleaner energy. But rather than digging their own grave, coal stocks rank near the top of this year’s fastest-moving industries, collectively gaining nearly 40% since the start of the year.Coal stocks launched into a steep rally in 2020. In 2022, Russia’s invasion of Ukraine supercharged natural gas prices, making coal once again price-competitive. In 2023, coal stocks pulled back from March to early June. They then launched into an almost 75% rally — with the 13-stock group surging 25% in September.

Why? One piece of the complex answer is metallurgical or coking coal. Still a critical ingredient in traditional blast-furnace steel production, U.S. met coal comes from Appalachian region mines and earns a hefty premium to the thermal coal used in power generation. Met coal miners Consol Energy (CEIX) and coal supplier Alpha Metallurgical Resources (AMR) have led the industry charge, soaring 61% and 52%, respectively, in 2023.

Meanwhile, among miners producing primarily thermal coal used in energy production, Alliance Resource Partners (ARLP) has gained 13% and Arch Resources (ARCH) edged up 7%

Alaska has a lot of such operations on those fronts.

What’s the outlook for coal?

Here’s another authoritative source, Standard & Poor’s, citing the International Energy Agency:

Global investment in coal to rise 10% in 2023 to $150 billion: IEA

So Bank of America was leaving this gold rush of profit for itself on the table, and instead pursuing the constantly money-losing green energy for all its lending purposes. Net result: Other banks made money on coal and Alaska lending, while BofA had to stew in its juice with all the greenie money-losers it was focused on lending to.

Net result, underperformance, and everyone can see it in those earnings figures.

Now, this may not be all the story of why it’s underperforming but you can bet that shutting on a major money-earning industry from lending is going to give that business to a lot of other banks.

No wonder they backtracked on who they’d lend money to. At least they were smart enough to notice. Now the question is whether they’re honest enough to admit it.

Image: Mike Mozart, via Flickr // CC BY 2.0 DEED