India’s biggest bank, State Bank of India (SBI), is caught between Larry Fink and Narendra Modi.
It is being asked to finance coal projects to meet the Indian leader’s push to electrify more homes, yet it wants to back renewable projects to appease investors like BlackRock Inc. For now it’s doing a bit of both.
SBI’s loans to the power sector stood at 1.86 trillion rupees at the end of March with 319.2 billion rupees of loans to renewable energy, according to the bank’s latest analyst presentation.
The listed state-owned lender has a tough balancing act on its financial support for coal-fired power plants, which are a major contributor to air pollution.
International investors are increasingly restricting support to companies involved in extracting or consuming coal, yet nearly 70% of India’s electricity comes from coal plants and demand for power is set to rise as the economy recovers from the blows of the pandemic.
BlackRock and Norway’s Storebrand ASA, both of which hold less than 1% in the bank according to Bloomberg data, raised their objections over the past year.
Amundi SA divested its holdings of the lender’s green bonds because of the bank’s ties to a controversial coal project in northern Australia.
The bank has been boosting the share of loans to the clean energy sector and it approved three times more loans to solar projects in the financial year that ended in March than to the overall thermal sector.
Funding for global energy is at a tipping point. Green bonds and loans from the global banking sector so far this year exceeded the value of fossil financing for the first time since the clinching of the Paris Agreement at the very end of 2015.
In India the shift towards solar from thermal is happening gradually as companies move toward cleaner fuel-based technology.
Reference- BloombergNEF, Economic Times, Business Standard, SBI & BlackRock inc. website