Are Your Investment Advisor’s Fees Going to Coal Mining?

By Dale Wannen

If you have an account with one of the large brokerage firms out there, like Morgan Stanley or Chase, you may think, “Oh well, my small amount of assets can’t amount to these companies doing harm to the planet." Think again. Most investment advisors at these firms take a management fee. Of that management fee they charge, a certain percentage gets sent up to headquarters that contributes toward the money-making machine. These same companies offering you free golf balls and “unbiased” investment advice are also lending millions, if not billions, to the largest source of CO2 in the world, coal.

Coal plants are the nation’s top source of carbon dioxide emissions, the primary cause of global warming. The U.S. still accounts for 20 percent of the world’s coal production with China ranking first -- producing 40 percent of the world’s use. Burning coal is also a leading cause of smog, acid rain and toxic air pollution. This leads me to my first point. Who is actually lending money to these coal companies to stay in business? This list may surprise you.  Shouldn’t they all be going out of business? While the state of California has cut coal production by 35 percent since 10 years ago, states like Texas and Arkansas have seen double-digit growth.

The fifth annual Coal Finance Report Card, published by Rainforest Action Network, the Sierra Club and BankTrack, looks at the impacts of the banking sector’s financing of the dirty coal industry. These investments have yielded extreme consequences -- ranging from spills of coal ash that contaminated public water supplies to bankruptcies that left taxpayers on the hook for hundreds of millions of dollars. In 2013, investment banks poured $31.7 billion into financing U.S. coal mining and coal-fired power companies.

In spite of reports from top investment banks that found the financial case for investment in coal to be crumbling, U.S. banks led 50 loan and bond transactions with coal companies that practice mountaintop removal mining and electric power producers that operate large coal-fired power plant fleets. The divestment movement clearly has not reached all parties.

The report’s grades and league tables highlight how some banks, including Wells Fargo, took steps to reduce their exposure to the coal industry by phasing out financing relationships with the largest producers of mountaintop removal coal, becoming the first U.S. banks since the first Report Card was published in 2010 to earn a “B” grade. However, other banks, including Barclays (No. 1 in financing of mountaintop removal coal companies in 2013 with $550 million), Citigroup (No. 1 in financing of coal-fired power companies in 2013 with $6.5 billion) and Morgan Stanley (D+ grade), deepened or maintained strong ties to the coal industry.

Banking and holding your investment accounts with independent firms focused only on sustainable investing  can keep those assets and advisory fees away from going toward those coal-mining companies.

Image credit: 1) Flickr/martin 2) BankTrack

Dale Wannen is President of Sustainvest Asset Management, an investment advisory firm focused on sustainable and responsible investing (SRI) based in Petaluma, CA. Dale has an MBA in Sustainable Management from Presidio Graduate School in San Francisco.