Big banks’ 2°C commitments
Australia’s big four banks have all publicly supported the international agreement to limit global warming to less than 2°C above pre-industrial levels.
They’ve even recognised they have a role to play in the necessary transition to the low-carbon economy that’s necessary if we are to achieve the less than two degrees outcome.
But talk is cheap, and the banks have so far failed to back their statements up with meaningful action to stop lending to fossil fuels.
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What have the banks said?
“Westpac is committed to operating, both directly and indirectly, in a manner consistent with supporting an economy that limits global warming to less than two degrees. Westpac will continue to evolve its frameworks, policies and position statements, linked to concrete action to ensure our lending and investing activities support an economy that limits global warming to less than two degrees, based on research into the carbon intensity of our activities.” – Brian Hartzer, Westpac CEO
“We support the goal of governments around the world seeking to limit the average global temperature rise to no more than 2°C above pre-industrial levels. ANZ as a responsible and sustainable business is playing its part to support the transition to a decarbonised economy.” – ANZ Climate Change Statement
“International efforts to limit global warming to two degrees Celsius above preindustrial levels will require a transition from traditional economic models, and the world’s current energy mix, to low carbon and renewable alternatives… We play a role in supporting the transition to a low carbon economy and will continue to actively seek opportunities to lend to, invest in, and support innovative technologies and businesses that decrease dependence on fossil fuels and mitigate the effects of climate change.” – Commonwealth Bank Group Environment Policy
“NAB [supports] the globally agreed goal to limit global warming to less than 2°C above pre-industrial levels,… NAB believes the financial sector has an important role to play in assisting the transition to a low carbon economy, through both the energy we purchase directly and through financing.” – NAB Climate Change Statement
What a two degree limit means
Let’s not kid ourselves. Two degrees means danger. The extent of impacts from climate change being felt just from 0.9ºC of global warming are bad enough. To think that we’re aiming to limit global warming to twice as much as we’ve seen since pre-industrial levels is not comforting. Many Pacific Island nations have called for a much stricter limit to warming of 1.5ºC above pre-industrial levels, as their homes and very identity are threatened by climate change and the impacts of sea-level rise.
But even getting to two degrees means huge change to the world’s energy system.
A Carbon Brief comparison of carbon budgets indicates that on current greenhouse gas emission rates, a budget to give the world a 50% chance of keeping global warming to less than two degrees would be exhausted within 28 years. If that probability is increased to somewhat safer odds of 66%, we will be on track to use up our carbon budget within 20 years. To select the most ambitious – and most desirable – target of a 66% probability of keeping global warming to less than 1.5˚C gives us barely 5 years of greenhouse gas emissions at current rates.
The role of the big banks
Banks are every bit as important to the effort to keep global warming to less than two degrees as governments and industry. Banks provide the finance that make projects happen and keep them going, be they based in fossil fuels or renewable energy. It is critical that banks are committed to keeping global warming to less than two degrees, but also that they realise meeting this goal means radical change in how they do business.
Any bank that acknowledges the importance of global warming to two degrees must also acknowledge the role they play in helping to meet that goal.
Specifically, this means:
- A commitment to no longer finance projects that expand the fossil fuel industry
- A plan to rapidly phase out exposure to the fossil fuel sector – our research shows the banks can be coal-free in five years
- A commitment to ramp up renewable energy lending to fill the gap that will be left as fossil fuels are replaced.
Which international banks are excluding fossil fuels?
Some international banks have adopted policies that exclude or restrict lending to fossil fuels. While none of the various approaches taken presents a perfect, or even sufficient, response to the climate crisis, they provide examples of concrete steps being taken to bring lending processes into line with a less-than-2°C warming scenario.
Along with a bunch of other international NGOs, our friends over at BankTack.org have released their latest Banking on Climate Change report, which studies and rates banks’ fossil fuel policies. Australia’s big banks’ policies generally rank in the bottom half of the 36 banks studied.
Engagement and advice
Part of our role at Market Forces is to engage with financial institutions, encouraging and helping to facilitate the changes required to decarbonise our economy and ensure a safer climate future.
We have developed a guide that sets out the imperative for the banks to act, and how these actions must translate into policy and practical changes. This advice, which is detailed in the sections below, has guided many of our recent interactions with the big banks and other financial institutions.