Banks: the good, the bad and the slow
Cameron Jewell | 14 November 2017
It’s reporting season, and Australia’s big four banks have now all released their results, and some a stand-alone sustainability report.
The good news is that they’re moving, albeit glacially, towards more sustainable investments, however collectively they are still exposed to almost $30 billion in fossil fuels.
According to environmental finance group Market Forces, all are showing a decline in exposure to coal, including ANZ, which has the highest exposure of $1.1 billion, close to double that of Westpac or NAB.
The big news this week was from NAB, which announced a review of its support for fossil fuels, as well as for diversified miners that don’t have a strategy to transition away from coal.
The announcement was welcomed by Greenpeace, with campaigner Jonathan Moylan saying it was “an important step” that reflected community concern, though was not enough in the context of the Paris Agreement.
“In order to meet their Paris commitments of keeping warming well below two degrees and as close to 1.5 degrees as possible, financial institutions need to rule out new coal investments and phase out fossil fuels by 2030,” Mr Moylan said.
“A proper review based on science and the Paris commitments would lead NAB to this conclusion.”
Not so kind to NAB’s oil and gas commitment
Market Forces wasn’t as kind in their assessment of NAB’s sustainability performance. While coal investment fell, it was a different story for oil and gas, with NAB’s exposure up 71 per cent in just a year.
This was a $3 billion increase in exposure to oil and gas extraction, which “rang alarm bells over whether the bank is serious about matching their positive rhetoric on climate change with action”, it said.
But the big scorn is retained for the Comm Bank
Greenpeace held its scorn for the Commonwealth Bank, last month dumping 100 bags of coal to the bank’s Sydney HQ in protest of its refusal to rule out coal financing. Its annual general meeting this week is expected to be disrupted by protests against its continued support for coal projects.
Selected report highlights
NAB said it has provided $13.4 billion in financing to address climate change, and support the transition to a low-carbon economy.
The breakdown includes:
- $0.2 billion to Green Star buildings
- $2.3 billion to renewable energy, adaptation and low-emissions transport projects
- $2.1 billion to green bonds
- $0.1 billion finance to customers to lease assets that improve energy efficiency or generate renewable energy
- $0.2 billion in environmental advisory, underwriting and arranging activities
The bulk, however, was $8.5 billion in lending to “support development of 6 Star residential properties”. It must be noted that 6 Star is the agreed national minimum standard, and while many buildings don’t end up meeting minimum standards, all financing of residential housing should be 6 Star, so this support is not above business as usual lending practices.
A response to this issue was not received by NAB by deadline.
“Our climate change commitments have been updated as part of our ongoing support of the low carbon transition,” NAB chief executive Andrew Thorburn said in NAB’s sustainability report. “These changes include increasing our environmental financing commitment from $18 billion by 2022 to $55 billion by 2025 and committing to source 50 per cent of our Australian electricity from renewable projects by 2025.”
Westpac financed clean tech and environmental services to the tune of $7 billion. The target is to reach $10 billion by 2020 and $25 billion by 2030. It also increased the proportion of renewable energy financing from 45 per cent to 65 per cent over the past six years.
The bank invested $1.32 billion in social and affordable housing, though this was less than the $2 billion target it had set itself, blaming a lack of “scalable solutions”.
In terms of coal Westpac did not rule out support for new mines but tightened its criteria, with financing limited to existing coal producing basins. Projects must also rank in the top 15 per cent globally in terms of coal quality. This was seen as a way for the bank to rule out financing for the Adani mine.
“Fifteen years ago, Westpac set out its first sustainability strategy outlining the group’s position on the responsibility of business, with a vision that every generation should live better than the last,” Westpac Group chief executive Brian Hartzer said.
“As we reflect on our performance against the actions set out in our 2013-17 Sustainability Strategy, we have made strong progress.”
Commonwealth Bank released a corporate responsibility report this year, though hasn’t released a stand-alone sustainability report.
It invested $2.8 billion in renewables, $1 billion in climate bonds, and plans to boost its low-carbon investment target to $15 billion by 2025. It has also said it will target an average emissions intensity decrease of lending consistent with a commitment to a net zero emissions economy by 2050.
Though, again, while exposure to coal fell 79 per cent to $0.3 billion, gas exposure rose 183 per cent and oil 114 per cent.
“We have been supporting the shift in the Australian economy towards low carbon energy alternatives, with a significant movement in our lending to the energy value chain from coal towards renewables and gas as a transition fuel,” the report states.
“Our Climate Policy Position Statement outlines our commitment to limiting climate change to well below two degrees and our responsible lending approach will contribute to this commitment.”
ANZ will release a corporate sustainability report in December.
It’s annual report, like the other banks, has revealed the bank has undertaken “scenario testing” of carbon-exposed customers.
“We assessed these customers using two of the International Energy Agency’s scenarios; the ‘New Policies Scenario’ and the ‘450 Scenario’. This provided us with a better understanding of the preparedness and resilience of these customers to climate change. We will engage with them over the next 12 months to gain further insights into their risk and opportunity assessments.”
It said it had invested $6.9 billion in low-carbon solutions since 2015, with a key sustainability outcome the $150 million green bond with Investa used to refinance a portfolio of low-carbon buildings.