Bank financing for mining projects such as Adani Australia and Tatas in Indonesia is set to resume with nearly two-thirds of Australia’s Great Barrier Reef making a strong recovery and recording the greatest coral cover in nearly four decades. Foreign banks have previously been reluctant to lend to coal mining projects, citing potential damage to the Great Barrier Reef – a UNESCO protected area.
According to a report by the Australian Institute of Marine Science, a government agency, over the past 36 years of monitoring, coral reefs in the region have shown an ability to begin to recover from disturbances. In the past, the Great Barrier Reef suffered widespread and severe bleaching due to rising ocean temperatures. Environmentalists had cited these events to lobby against coal mining projects in Australia and foreign banks had stopped funding these projects.
But with the reef’s strong recovery and geopolitically altered events like Europe reopening its coal-fired power projects after Russia cut off gas supplies, funding for mining projects could resume, bankers say. Tata Power will import coal worth Rs 14,000 crore this year from Indonesian mines and owns a 30% stake in the coal mine. Adani Australia began exporting coal from its Carmichael mine from this year.
The projects could also attract insurance cover, as reinsurance companies closely monitor climate change reports such as the Australian Institute of Marine Science. In the first half of the current calendar year, worldwide insured losses from natural disasters amounted to $35 billion.
“Climate change is clearly a major risk for banks and reinsurance companies, but due to changing geopolitical reasons and the acceleration in the mining of lithium for electric vehicles and coal for energy security , funding for these projects will also increase,” a banker said.