Mining projects may attract bank financing as Great Barrier Reef recovers

Bank financing for mining projects such as Adani Australia and Tatas in Indonesia is expected to revive with almost two-thirds of the Great Barrier Reef in Australia making a sharp recovery and recording the highest amount of coral cover in nearly four decades. Foreign banks were earlier hesitant to lend to the coal mining projects citing potential damage to the Great Barrier Reef – a UNESCO-protected area.

As per a report by the Australian Institute of Marine Science, a government agency, over the past 36 years of monitoring by it, the coral reefs in the region have shown an ability to begin recovery after disturbances. In the past, the Great Barrier Reef has suffered from widespread and severe bleaching because of rising ocean temperatures. Environmentalists had cited these events to lobby against the coal mining projects in Australia and foreign banks had stopped financing these projects.

But with the sharp recovery of the reef and changed geo-political events like Europe re-opening their coal-based power projects after Russia stopped gas supplies, the financing for mining projects may revive, say bankers. Tata Power will import coal worth Rs 14,000 crore from Indonesian mines this year and owns a 30 per cent stake in the coal mine. Adani Australia started exporting coal from its Carmichael mine from this year onwards.

The projects would be able to attract insurance cover also as re-insurance companies keep a close eye on climate change reports such as the Australian Institute of Marine Science. In the first half of the current calendar year, global insured losses from natural catastrophes were $35 billion.

“Climate change is clearly a major risk for banks and reinsurance companies but due to changed geo-political reasons and mining of lithium for electric vehicles and coal for energy security picks up pace, the financing for such projects will also pick up,” said a banker.