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Banks ranked on exposure to unburnable carbon risk

ANZ and the Commonwealth Bank are the most exposed to “unburnable carbon” risk, according to a new report from the Australasian Centre for Corporate Responsibility, which has launched a campaign designed to hold Australian banks to account over climate change risk management.

“The report shows that there is a huge difference between the banks that shareholders and customers should be aware of,” Caroline Le Couteur, executive director of ACCR, said.

“Our research shows that ANZ and the Commonwealth have the highest level of carbon exposure and have clearly taken a very short term view of the risks.”

Westpac was the least exposed and best prepared of the major banks, the report found.

The other three major banks, which included NAB, had “failed to adequately disclose their carbon exposures to shareholders who now should be thinking about moving their investments to banks with a longer term climate view”, Ms Le Couteur said.

The report estimated the percentage of lending going to fossil fuels for each bank, with ANZ lending 38 per cent, CBA 18 per cent, Westpac 14 per cent and NAB 13 per cent.

None of the banks, it said, provided much disclosure to shareholders quantifying the extent of the risks faced by shareholders.

The campaign has been launched in partnership with the Asset Owners Disclosure Project, chaired by former federal Liberal leader John Hewson, a former director of Macquarie Bank.

“If you are a carbon exposed company looking to borrow money in the hope that climate change goes away, then you’ll head straight to CBA and ANZ as they seem happy to take an extraordinary gamble on a high carbon future for these companies,” Dr Hewson said. “I pity their shareholders when the music stops.”

He said shareholders in banks, particularly Australian superfunds, had a great opportunity to request much more detailed information on exposures at AGMs.

The ACCR, with help from Environmental Justice Australia, is currently in a legal challenge with CBA after the bank rejected a resolution calling for greater disclosure of carbon-exposed lending.

“This is because when we put a number of shareholder resolution to CBA asking the bank to report on the climate risk it faces, CBA responded by putting our special resolution on its AGM agenda but refused to put the ordinary resolutions,” an ACCR statement said. “A special resolution requires 75 per cent of the shares voting to pass and amends the company constitution. An ordinary resolution only needs 50 per cent of the votes and for most issues would be appropriate.

“This is an important test case, with implications for all Australian companies. If we win, it will make it much easier for shareholders to voice concerns about the actions of the companies they own.”

The rejected resolution stated:

That, in the opinion of the shareholders it is in the best interests of the company that the Directors provide to the shareholders by the time of the release of the 2015 Annual Report, a report prepared at reasonable cost and omitting any proprietary information outlining: (a) the quantum of greenhouse gas emissions that the company is responsible for financing calculated, for example, in accordance with the Greenhouse Gas (GHG) Protocol guidance; (b) the current level and nature of risks to the company from “unburnable carbon”; and (c) current approaches that have been adopted by the company to mitigate those risks.

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