State Bank of India torn between BlackRock and coal funding

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India’s largest bank is between Larry Fink and Narendra Modi. The State Bank of India needs to fund coal projects to meet the Indian leader’s efforts to electrify more homes, but it wants to support renewable projects to appease investors like BlackRock Inc. Right now she’s doing a bit of both.

“Investor concerns are very important to us, we take them into account,” said Ashwani Bhatia, head of corporate banking and global markets at the lender, in an interview. “But we also have obligations to the country. There is so much coal. “Mines that are being developed in India because we need them to produce steel, aluminum and electricity.”

The publicly traded state lender has a tough balancing act when it comes to providing financial support for coal-fired power plants, which are a major contributor to air pollution. International investors are increasingly restricting support from companies involved in the extraction or consumption of coal, yet almost 70% of India’s electricity comes from coal-fired power plants and demand for electricity is expected to rise as the economy takes the beating of the Pandemic recovered.

BlackRock and Norwegian storebrand ASA, both of which hold less than 1% in the bank according to Bloomberg data, raised their objections last year. Amundi SA sold its holdings of the lender’s green bonds because of the bank’s ties to a controversial coal project in Northern Australia.

The State Bank of India has not yet decided whether to fund the Carmichael mine for Adani Enterprises Ltd, whose main shareholder is Indian billionaire Gautam Adani, due to mounting pressure from climate activists and investors, Bloomberg reported in April.

The financing of global energy is at a turning point. For the first time since the Paris Agreement was signed in late 2015, green bonds and loans from the global banking sector exceeded the value of fossil fuels this year.

In India, moving away from coal will take time. Millions of citizens were without power months after Modi’s scheduled deadline to electrify every home two years ago. The Ministry of the Environment further delayed environmental protection guidelines for power plants that use the fuel earlier this year.

The transition from thermal to solar in India is gradual as companies move to cleaner fuel-based technology, Bhatia said, adding that the bank is interested in funding companies that make electric cars. The bank also charges 20 basis points less on loans to individuals who borrow to buy electric vehicles, he said.

The bank increased the share of loans to the clean energy sector and approved three times more loans for solar projects than for the entire heating sector in the fiscal year that ended in March, said the 59-year-old banker. Because there was hardly any demand for new loans from producers of fossil fuels in the past year. Most long-term loans for thermal projects are existing commitments.

According to the bank’s latest analyst presentation, the lender’s loans to the power sector at the end of March were 1.86 trillion rupees ($ 25.6 billion), or 7.3% of the total of 319.2 billion rupees in renewable energy loans . The company does not disclose a breakdown of its loans to coal or other segments of the power sector.

“As the largest bank in the country, we are also the largest funder of large corporate solar initiatives,” he said.

This story was published through a news agency feed with no changes to the text. Only the heading was changed.

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