NAB 2019 policy update analysis
15 November 2019
NAB has today released its suite of reports, including an updated sustainability report that, from Market Forces’ perspective, is too little, too late and a recipe for climate catastrophe.
Out of thermal coal (mining) by 2035
A headline of NAB’s policy update was that it would exit the thermal coal sector by 2035. While even this degree of action is likely to make Scott Morrison fume, it is still short of what is necessary to meet the climate goals of the Paris Agreement.
Research by Climate Analytics points to a need for OECD countries to have phased out coal power completely by 2031, while an increasing number of investors have called for coal power to be phased out by 2030 in OECD countries.
NAB’s commitment also falls short of other thermal coal exit commitments made this year by Commonwealth Bank (2030), QBE (2030), Suncorp (2025) and IAG (2023).
No new coal power or mines? Let’s see about that.
NAB has standing policies to no longer finance new thermal coal mining projects or new-to-bank thermal coal mining customers, and new or material expansions of coal-fired power generation facilities, unless there is technology in place to materially reduce emissions.
It is committed to not financing oil/tar sands extraction projects, or oil and gas projects within or impacting the Arctic National Wildlife Refuge area and any similar Antarctic Refuge.
It is worth taking each of these policies in turn because, while they sound good on the surface, most are either being breached, or have no material impact on the bank’s lending activity in the first place.
It is hard to imagine who NAB is talking about when it references new to bank thermal coal mining customers, as it is hard to imagine who would be left after the coal miners that NAB currently banks or has banked in the past.
The commitment to not finance any new coal power stations or “material” expansions of existing facilities, unless there is technology in place to “materially” reduce emissions seems like it warrants a definition of what NAB considers material, as it implies a lot of wriggle room for coal plants to justify further lending.
On arctic oil and gas, or tar sands, this sounds great but when you learn that NAB was never in, or ever going to be in those sectors, it’s hard to get excited about a commitment that sends the right signals, but doesn’t actually change anything.
Continuing to bank customers with transition plans.
NAB commits to “Supporting current coal-fired power generation customers implementing transition pathways aligned with Paris Agreement goals of 45% reduction in emissions by 2030 and net zero emissions by 2050”.
This would presumably exclude the likes of AGL and Origin, which fail at the first hurdle of reducing emissions by 45% by 2030, but something tells us NAB is still happily banking these companies, both of which pushed back against shareholder proposals this year to disclose targets for reducing operational emissions in line with the goals of the Paris Agreement.
$70 billion on environmental finance by 2025
That’s a big number, and a big increase on NAB’s previous commitment of $55 billion. But upon closer examination, it’s a pretty cheeky claim for NAB to make. For instance, half of the $70 billion funding commitment is for mortgages for 6-star residential housing. Obviously we need as much energy efficiency and low carbon impact housing as possible but to claim the entire value of a mortgage for a home where only a fraction of its value would be spent on greening measures is a bit rich.
Another $20 billion is to be spent on “green infrastructure, capital
markets and asset finance”, leaving much of what this specifically translates to up to the imagination.
NAB’s fossil fuel exposure on the rise
In the past year, NAB’s exposure to coal, oil and gas has dramatically increased. The table below compares NAB’s reported exposure to coal, oil and gas against ANZ, Commonwealth Bank and Westpac.
In the twelve months to June 2019, Market Forces has been able to identify $1.83 billion of lending to fossil fuels, including several projects that expand the scale of the fossil fuel industry. One LNG project in the United States alone will result in another 800 million tonnes of CO2 added to the atmosphere, while NAB has also helped finance six new gas power plants in the US.
In March 2019 NAB also loaned US$76 million for construction of the Midship Pipeline in Oklahoma, USA, intended to transport new gas production from a major oil & gas producing region; the Anadarko Basin. When operating at full capacity, this pipeline would transport enough gas each day to produce 5% of Australia’s daily average greenhouse gas emissions.
Further, in October 2018 NAB co-financed a $720 million deal backing Coronado Global Resources. Coronado’s contract to supply thermal coal via the Curragh coal mine to the Stanwell power station in central Queensland is expected to keep Stanwell operating well beyond the investor-backed, Paris-aligned 2030 deadline for OECD countries to phase out coal power. Further, Coronado announced in August (2019) it was expanding Curragh and in September NAB committed to co-finance an additional US$200 million to fund the expansion.
Fallen at the first hurdle
The first test of any financial institution’s response to climate change is whether they will clearly exclude funding to new coal, oil and gas projects. We can’t have a serious conversation about decarbonising the economy while continuing to expand the very sectors that need to contract. There is no room for any new fossil fuel projects in a scenario where we hold global warming to 1.5ºC and on that basis alone, NAB’s current policies fail to deliver the kind of climate action one could expect from a bank that wants to lead on sustainability.
The fact that it is setting policies that it is either failing to adhere to, allowing for clients whose business strategies are consistent with the failure of the Paris Agreement, or contain loopholes that allow the bank to be exposed to more coal power or mines, mean NAB’s sustainability policies are a recipe for climate disaster.