Intesa Sanpaolo introduces new guidelines to slash financing to the coal sector

Intesa Sanpaolo (BIT: ISP) released new guidelines on Tuesday that slashed funding to Italy’s coal sector. The move came in line with the other banks that are seeking to enhance their green credentials.  

Italy’s largest retail bank announced that it will no longer be approving new applications for loans aimed at investments in building coal-fired facilities or coal-mining projects. The news came only weeks after the bank reported strong financial results for the first quarter.

At £1.26 per share, Intesa Sanpaolo is currently about 40% down year to date in the stock market. In contrast, its performance in 2019 was reasonably upbeat with an annual gain of a little under 20%. Learn more about understanding stock market volatility.

Italy aims at phasing out coal-powered projects by 2025

According to Intesa Sanpaolo, the change in guidelines is targeted at playing a role in helping its customers make a switch from coal to low carbon alternatives for energy production.

Environmental campaigners are increasingly focusing on ending investments in projects that aim at generating power via coal-fired plants. Such a commitment, as per the campaigners, is no longer optional but a necessity to meaningfully mitigate the rising risk of climate change.

A range of major banks has committed to achieving this goal in a bid to meet the growing demand from activist investors and ensuring sustainability in lending. In November 2023, Italy’s largest bank in terms of assets, UniCredit, said that by 2023, it will entirely stop all funding to thermal coal projects.

Italy’s current coalition government has ordered all industries and businesses to transition from coal-powered plants to alternatives by 2025.

New guidelines exempt credit line renewals and extension

In its statement on Tuesday, Intesa Sanpaolo also accentuated that the new guidelines and the associated restrictions on lending will exempt credit line renewals and extention with a defined maturity.

It further added that companies that are generating power via renewable sources will be eligible for new loans even if they are currently involved in using fossil fuels as a source to produce energy but with a long-term strategy to make the transition to low carbon alternatives. The bank said:

“Intesa Sanpaolo will continue funding companies with a medium/long-term strategy for gradually cutting their use of coal.”

Italy’s banking group posted a year to date high of £2.32 per share in February followed by Coronavirus driven downward rally that ended in a low of £1.18 per share in April. Intesa Sanpaolo is currently valued at ££22.12 billion and has a price to earnings ratio of 5.67.