Opinion | What would Adam Smith say about the rush by banks to stop funding coal power plants?
- Banks are rushing to end the funding of new coal power plants, based on corporate social responsibility (CSR)
- Coal power plants are still needed by many people in the developing economies of Southeast Asia
Adam Smith famously said that “I have never known much good done by those who affected to trade for the public good.”
Nowhere is the merit of the great sage’s insight more evident than in the veritable parade of banks that have rushed to end the financing of new coal power plants.
The reasoning among banks follows the familiar corporate social responsibility (CSR) route. CSR initiatives by banks call for investment or loan decisions based not on risks and rewards in a competitive market, but on judgment by corporate management on what is in the interest of society.
Larry Fink, chief executive of the world’s largest asset management company BlackRock, with US$6 trillion under management, recently called on the private sector to be more heavily involved in broader societal challenges.
Such challenges include workforce diversity, community engagement and, not least, environmental challenges. Banks seem to have agreed with Fink’s call, and in Southeast Asia, this has taken a particular turn against coal power projects.
Over 90 per cent of coal power plants under construction are in Asia. After China and India, Southeast Asia is the region most invested in expanding coal-fired power generation. With a population of 650 million people, the region has some 65 million people without access to electricity and 250 million people still depend on traditional biomass - cow dung, crop residues, foraged wood and charcoal - for cooking and heating.