29 October 2020
Today ANZ released new and updated coal policies as part of its full year results, promising to exit thermal coal by 2030 and immediately stop funding new thermal coal mines and coal-fired power stations. This means no major Australian bank or insurer is willing to back thermal coal beyond 2030, except for NAB.
However, the bank’s policies remain woefully inconsistent with the Paris Agreement, allowing it to fund companies which continue to expand the fossil fuel industry, such as those exploring and exploiting new oil or gas fields.
Furthermore, despite coming five years after the Paris Climate Agreement, ANZ has given coal companies a further five year window to plan business diversification.
“This new policy is underwhelming. It barely even brings ANZ into line with announcements made by the other big 4 banks on thermal coal, and gives highly polluting companies another five year free pass to continue with business as usual”, said Market Forces Research Coordinator Jack Bertolus. “This is a case of rewarding failure.”
The policies also fail to prevent finance to new oil and gas projects, and to manage down ANZ’s exposure to these sectors in line with the Paris climate goals.
As such, Market Forces will move forward with a shareholder resolution calling on the bank to formulate and disclose Paris-aligned strategies and targets to reduce its fossil fuel exposure.
|Previous commitments||Updated commitments|
|Exclusion on funding new coal-fired power stations emitting more than 0.8 t CO2/MW.||(Immediate) “Not directly financing any new coal-fired power plants or thermal coal mines, including expansions. Existing direct lending will run off by 2030.”|
|Exclusion on new-to-bank lending to customers whose thermal coal assets exceed 50% of revenue, installed capacity or generation (mining, transport, ports and power generation).|
Market Forces understands ANZ is unable to identify any companies that have been excluded as a result of this policy.
|“No longer banking any new business customers with material thermal coal exposures.” (‘material’ defined as “more than 10% revenue, installed capacity or generation from thermal coal”.)|
ANZ was unable to identify any companies that this policy would apply to.
“Engaging with existing customers who have more than 50% thermal coal exposure to support existing diversification plans. Where these are not already in place, we will expect specific, time bound and public diversification strategies by 2025. We will cap limits to customers which do not meet this expectation and reduce our exposure over time.”
Background: rewarding climate-destructive companies
“To meet the upper Paris goal (‘well below 2C’), we must achieve net zero emissions by 2040-2050. This requires a rapid phase-out of existing fossil fuel infrastructure, leaving no room for expansion of the gas industry.” – 25 leading scientists at Australian universities
There is no room for expansion of the fossil fuel industry in a Paris-aligned decarbonisation pathway. Yet ANZ’s ‘diversification strategy’ serves as a reward to companies expanding the fossil fuel industry as it gives the most climate-destructive coal companies another five years to formulate transition plans, while not even touching oil and gas companies. Even if these plans were formulated, ANZ could decide to keep funding coal companies anyway, as it’s entirely unclear what the bank requires of their plans.
Further, coal companies could ostensibly skirt the bank’s revenue thresholds by growing revenue in non-coal segments of the business, leaving revenues and emissions from coal operations only slightly decreased or even unchanged.
Since 2016, ANZ has loaned at least $1.9 billion to 12 ASX300 companies whose business plans rely on the failure of the Paris Agreement, including AGL Energy, APA Group, Aurizon, Beach Energy, Cooper Energy, New Hope Group, Oil Search, Origin Energy, Santos, Senex Energy, Whitehaven Coal and Woodside Energy. (ANZ subsequently exited Whitehaven Coal’s lending syndicate in February this year, having previously funded the company in 2017.)
Just last week ANZ co-arranged a US$750 million loan to Santos, with the bank taking on US$50 million of the debt itself. Santos is expanding the gas sector with projects including its highly controversial Narrabri Gas Project, and its board rejected a shareholder proposal to align capital expenditure and emission reduction plans with the Paris climate goals.
Oil & gas
The bank has failed to move the needle on its oil and gas investments, leaving the door wide open to acting inconsistently with the Paris Agreement by funding new projects and companies expanding those sectors. In comparison to its major competitors:
- CommBank last year committed to “only providing Banking and Financing activity to New oil, gas or metallurgical coal projects if supported by an assessment of the environmental, social and economic impacts of such activity, and if in line with the goals of the Paris Agreement”.
- This year, Westpac indirectly committed to not finance any new oil and gas projects by indicating that any financing of the sector from this point on will need to be in line with its commitment to the Paris Agreement.
- NAB has made no such commitments but its CEO says the bank will review its oil and gas policy “over the next six to 12 months” and that it has “a lot of work to do in having a look at that whole issue”.
ANZ also failed to set targets to reduce exposure to oil and gas, despite notable increases in oil and gas exposure in recent years.
ANZ’s exposure to oil & gas
|Financial year||Exposure at default (EAD)||yoy change (%)|
ANZ’s commitments on thermal coal are a step in the right direction, and rule it out of funding a number of proposed coal mines and expansions including New Hope Group’s New Acland Stage 3.
However, ANZ’s thermal coal mining exclusion is relatively weak, and doesn’t cover new or expanded coal mines whose reserves or production are as much as 35% thermal coal.
ANZ is the third ‘big four’ bank to announce an exit from thermal coal by 2030, leaving NAB as the only remaining major Australian bank willing to finance thermal coal beyond this point.
ANZ’s exposure to coal mining has fluctuated significantly, down 13% this year after two years of increased exposure between FY17-FY19.
ANZ’s exposure to coal mining
|Financial year||Exposure at default (EAD)||yoy change (%)|