Image Credit: twitter.com/TheOfficialSBI , Mercom India
The State Bank of India(SBI) is caught between the differing interests of the government of India and international investors like BlackRock Inc. The Modi government in its push to ensure electricity supply for all homes in India wants SBI to finance coal-based thermal power projects. On the other hand, international investors are increasingly wary of supporting companies involved in coal projects and want the bank to finance more renewable energy projects.
It may be noted that due to pressure from climate activists and NGO’s, international investors are no longer keen to support coal projects. Among the current investors in the bank, BlackRock and Storebrand ASA have raised objections to financing non-renewable power projects. The global funding for green energy is expanding rapidly. This year, green bonds and loans for green energy have exceeded the funding for fossil fuels for the first time since the signing of the Paris Agreement in 2015.
However, this stands in contrast to India’s requirements. 70 per cent of the country’s total electricity is generated from coal and millions of citizens are yet to get electricity connections from the government.
The conflicting interests have forced the bank to do a difficult balancing act by trying to fulfil both the priorities.
Indian billionaire, Gautam Adani’s Carmichael mine project in Australia has emerged as another problem for SBI. Amundi SA has divested from the bank’s green bonds complaining of SBI’s close ties to the coal project in Australia. State Bank is yet to decide whether it would finance Adani’s project or not.
Talking about the conflict the bank faces, Ashwani Bhatia, head of SBI’s corporate banking and global markets said that they consider investors concerns as very important. “But we also have commitments to the country. There are so many coal mines being developed in India because we need them to produce steel, aluminum, electricity,” he added.
Bhatia also defended the lender’s track record on green energy, saying that the bank had approved three time more loans to solar projects than to thermal project in FY2020-21. “Being the largest bank in the country we are also the largest funder of solar initiatives of large companies,” he said.