In the ANZ board’s recommendation to vote against the resolution, it said decarbonising the economy was complex, and the bank was already engaging with large carbon emitters.
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“ANZ firmly believes that climate change is a risk that needs to be managed now. That’s why supporting our large business customers to reduce their emissions is a key feature of our climate and environment strategy,” the board noted.
NAB chief climate officer Jacqueline Fox said renewables now made up 80 per cent of the total finance the bank provides to energy generation, up 7 percentage points in a year.
“We’re working together with our customers to decarbonise, and we’ll be transparent in our progress via updates in our annual climate report,” Fox said.
KPMG financial services consulting practice partner Ben Kilpatrick said banks needed to “responsibly” transition away from lending to fossil fuel companies, while increasing the capital it deployed to renewable projects.
“The nuance is in balancing the commercial outcomes with the need to achieve shareholder returns to meet fiduciary interests,” Kilpatrick said.
“As the cost of funding, and in general, the economy, has become more challenged since COVID, the decision banks have had to make on where they deploy capital is more challenging. Three years ago, we were in a very different global, geopolitical and economic situation – low interest rates, less geopolitical challenges and even in the energy market [was more secure].
“Realistically, it’s still going to be a challenge over the next two to three years.”
KPMG’s Banking on the Climate Transition report last year found less than 2 per cent of banks’ lending portfolios were in sustainable lending, compared to the United Kingdom and Germany (both 4 per cent) and in Scandinavian countries (7 per cent).
The report also said Australia would need to attract and invest $7 trillion of capital over the next decade to achieve a net zero economy by 2050.
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ANZ’s direct and indirect exposure to fossil fuels was the highest of the big four banks at $13.8 billion, albeit down 15 per cent compared to the previous year. CBA’s lending was $9.4 billion, Westpac’s was $6.8 billion and NAB’s $4 billion, according to the Macquarie analysis.
However, the analysts noted a like-for-like comparison was challenging because of the differences in disclosure. For example, NAB does not disclose refining exposure, even though ANZ, CBA and Westpac do.
ANZ is also Australia’s largest institutional bank, meaning its exposure to some of the largest carbon emitters is far greater. CBA’s lending portfolio predominantly comprises residential loans, while NAB’s biggest clients are small and medium enterprises. Westpac, meanwhile, has a combination.
Kyle Robertson, an analyst at environment activist group Market Forces, said while the exposure in overall reduction was positive, the major banks were still lending to companies who are expanding their oil and gas productions.
“That is totally at odds with their climate commitment, and is an impediment to a safe, clear and just renewable transition,” Robertson said.
“Banks should absolutely put in place a clear policy that any fossil fuel client that approaches them for finance has a Paris-aligned transition plan, and [lends to] activities with a Paris-aligned transition plan.”
The activist group commended CBA, but called out the other three banks’ plans as “weak”.
A Westpac spokeswoman said the bank no longer finances new thermal coal projects and in 2025 would stop lending to institutional clients if more than 15 per cent of their revenue came directly from thermal coal mining.
“We have a 1.5C aligned target for upstream oil and gas, which is to reduce our financed emissions by 23 per cent by 2030. We are on track to meet that commitment,” the spokeswoman said.
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