Banking Climate Failure

Banks lending to fossil fuels – by year (2016 – 2022)

Banks lending to fossil fuels – breakdown (2016 – 2022)

The banks’ key fossil fuel policy approaches – project finance restrictions and financed
emissions targets – leave major loopholes enabling them to continue pouring billions into new
and expanded fossil fuel developments.

Close a window, open a door 

The big four banks have committed to not providing direct finance for new thermal coal
projects, and all except ANZ have restrictions on project finance for new oil and gas fields,
although these are opaque and littered with caveats.

Yet none of the banks rule out financing the companies that are developing these new fossil
fuel supply projects and are therefore continuing to fund this activity. It’s also
worth noting that none of the banks exclude finance to new fossil fuel transport or
processing infrastructure, such as LNG terminals, despite these projects being out of line with
global climate goals.

The figures below reveal that since January 2016, just after the signing of the Paris
Agreement, corporate finance has accounted for 69 per cent of overall lending to the fossil
fuel industry by the big four. Direct project finance by the banks is becoming rarer and tends
to be for existing projects.

One of the worst examples of corporate financing of fossil fuel expansion came in March 2022 when ANZ, NAB and Westpac all provided an ‘acquisition loan’ to Global Infrastructure Partners for a 49 per cent stake in the proposed Pluto 2 LNG project, enabling Woodside to go ahead with Pluto 2 and its associated new Scarborough gas field, one of Australia’s most disastrous new gas projects and one that would be ruled out for direct project finance by NAB and Westpac’s policies.

Corporate finance facilitating new projects is not limited to the big four banks.  A report from Global Energy Monitor published in October 2022 stated that almost 80 per cent of global finance for planned coal projects comes from corporate loans. 

Each bank has a policy in place that only requires their heaviest emitting clients to have published transition plans in 2025, giving another two years for climate wrecking companies to establish disastrous new fossil fuel projects. And even then, without any indication of what an acceptable transition plan would be, there’s no guarantee the banks will even consider cutting ties and ending finance for companies expanding fossil fuels.

The banks have also adopted ‘financed emissions’ reduction targets for the coal, oil and gas
sectors. ‘Financed emissions’ are those attributable to a bank’s lending portfolio, for example
the emissions of a coal power station while a bank has an active loan to that power station,
proportional to the amount of finance that bank has contributed to the loan.

However, the banks can meet these targets by simply ensuring some loans have been repaid
by their target date (2030), meaning their financed emissions targets do nothing to stop
lending to new fossil fuel projects and the companies building them today. If built, these new
and expanded projects would lock in decades of ‘real-world’ emissions, regardless of whether the bank has an active loan in 2030 or not.

Total corporate and project lending (2016 – 2022)

Three Australian companies stand out as the worst when it comes to investing in new fossil fuel projects. The scale of the projects being pursued by these companies is aligned with catastrophic levels of global warming and the banks’ ongoing funding of these fossil fuel companies is enabling them to do so.

If the new projects of Woodside, Santos, and Whitehaven Coal all go ahead, the cumulative impact would be 4.2 billion tonnes of carbon dioxide (CO2), equivalent to more than 9 times Australia’s 2021 emissions.

Woodside – Funded by ANZ, NAB and Westpac

In July 2022, ANZ and Westpac loaned $125 million each to Woodside as part of a $1.76 billion general corporate loan.

Woodside is Australia’s largest producer of gas, and is pursuing massive expansion plans completely out of line with global climate agreements. Woodside’s business plans would see it bring on five new oil and gas projects currently in its pipeline. By 2027, the company is aiming to increase production by 45 per cent, and if it gets its way, their proposed projects would see an estimated 2 billion tonnes of harmful CO₂ entering the atmosphere.

Case study – Scarborough Pluto 2 LNG project

One of Woodside’s pipeline projects is the monstrous Scarborough-Pluto 2 LNG project. Pluto 2 would process the gas from the Scarborough gas field which would then be exported overseas.

Independent analysis by Climate Analytics, a non-profit climate science and policy institute, has concluded the project “represents a bet against the world implementing the Paris Agreement” and Carbon Tracker has stated Scarborough “is not competitive even in the
International Energy Agency’s 2.7°C warming scenario] STEPS – that is, a world that utterly fails to decarbonise”.

Yet in March 2022, ANZ, NAB and Westpac all financed a $4.6 billion loan to Global Infrastructure Partners to facilitate an acquisition of a 49 per cent stake in the Pluto 2 LNG project.

The gas produced from Scarborough-Pluto 2 would, when burned, see an additional 687 million tonnes of CO2 enter the atmosphere. First gas from Scarborough is expected to come online in 2026, a full five years after the International Energy Agency (IEA) declared that there is no room for new oil and gas projects in a world hoping to achieve net zero emissions by 2050.

Woodside’s Scarborough-Pluto 2 gas project is not just a climate disaster, it’s also a cultural heritage disaster.

Scarborough is located approximately 375 km off Murujuga, also known as the Burrup Peninsula. Murujuga country is home to some of the world’s oldest rock-art, dating back at least 50,000 years. First Nations Traditional Custodians have described the rock art as
Australia’s “pyramids of Egypt.”

A recent peer-reviewed study revealed evidence that industrial pollution in the north-west corner of Western Australia is causing damage to the rock art in Murujuga. The study concludes: “A reduction in industrial emissions is considered essential if damage to
the rock art is to be limited and this iconic cultural place is to remain largely intact for future
generations.”

Not only does the project violate the banks’ commitment to the Paris Agreement and net zero emissions by 2050, it also violates the rights of Traditional Custodians. Murujuga Aboriginal Corporation has stated: “If research finds that emissions do have an impact on the state of preservation of rock art, then MAC will expect the state and commonwealth government to adjust any existing approval to ensure the protection of cultural values at Murujuga”.

Santos – Funded by ANZ, CBA, NAB & Westpac

In August 2022, all big four banks participated in a $1.8 billion loan to one of Australia’s biggest oil and gas companies, Santos. The loan was partially related to Santos’ highly controversial Barossa gas field. The banks each contributed the following amounts the loan:

Contribution to most recent Santos loan

Santos is one of Australia’s largest oil and gas producers, and is pursuing massive expansion plans, which undermine the Paris Agreement and the chance of achieving net zero emissions by 2050. The projects that Santos has in its pipeline would see Santos increase its annual emissions by 40 per cent from 2022 to 2030. In the IEA NZE 2050 Scenario, emissions from oil and gas use fall 29 per cent this decade. 

Despite the IEA’s finding that there is no room for new oil and gas fields in a world hoping to achieve net zero emissions by 2050, Santos is pushing ahead with plans that would add an estimated 1 billion tonnes of CO2 into the atmosphere.

One of Santos’ projects, the Barossa gas field, is so emissions intensive that John Robert, a leading economist from the Institute for Energy Economics and Financial Analysis described it as “a CO2 emissions factory with an LNG by-product”.

Meanwhile, Santos’ Narrabri Gas Project would see 850 gas wells drilled throughout the Pilliga Forest, sacred to Gomeroi Traditional Owners. This project has been opposed for years by local farmers and the Gomeroi Traditional Owners.

Despite Commonwealth Bank, NAB and Westpac all having policies that restrict project finance for new oil and gas fields, the banks continue to hand over tens of millions of dollars of their customers’ money to a company committed to destroying the climate and local environment.

Case study – No Free, Prior and Informed Consent for Barossa-Darwin LNG project and the Tiwi Islands

By September, the Court had ruled in favour of the Tiwi Elder and invalidated Santos’ approval to drill for gas in the sea north of the Tiwi Islands. It was a landmark decision for the rights of Traditional Owners in the fight for cultural heritage protection.

The banks loaned to Santos while the court case was ongoing, and as such, must have known of Traditional Owners’ opposition to the Barossa project.

The fact that such a clear lack of Traditional Owner consent slipped through the cracks of the banks’ human rights policies shows Australia’s biggest financial institutions are failing to take their own commitments seriously. 

Australia’s big four banks all have policies requiring them to act in line with international human rights standards. All of the banks’ policies either include a direct commitment to the principle of ‘free, prior and informed consent’ (FPIC) or refer to the UN Declaration on the Rights of Indigenous Peoples, of which FPIC is a key principle.  

The impacts of the Barossa gas field and associated Darwin LNG expansion project on the local environment and cultural heritage of the Tiwi Islands, Larrakia Country and surrounding sea country would be far-reaching and disastrous. Traditional Owners have stated that the project risks disruption to songlines, sacred sites and cultural practices, as well as spills and pipeline ruptures in the local marine and surrounding environments.

In response to the banks’ financing of Barossa, Tiwi Islands and Larrakia Traditional Owners lodged formal complaints against ANZ, Commonwealth Bank, NAB and Westpac in April 2023 alleging that the banks breached their human rights commitments. These grievances are the first filed by Traditional Owners in Australia against financial institutions. 

The complaints demand the banks pull out of the existing loan to Santos and commit to not funding the proposed expansion of the Darwin LNG project, which would be used to process and export gas from Barossa.

Whitehaven Coal – Funded by NAB and Westpac

Whitehaven Coal is the largest undiversified coal mining company on the Australian share market, and has plans to massively expand the coal industry.

Whitehaven’s dirty expansion plans fly in the face of the world’s scientists, who say coal use must decline dramatically if we are to avoid the worst impacts of climate change.

Coal use must fall 75 per cent by 2030 and 95 per cent by 2050 to align with the IPCC model for keeping global warming to 1.5ºC.

Whitehaven has no plans to transition from coal mining. Instead the company is justifying its plans with coal demand scenarios consistent with a catastrophic 3ºC of global warming.

The company is pushing ahead with three new coal projects, Vickery, Narrabri Stage 3, and Winchester South.

When emissions from burning the coal from these mines are added up, over their lifetimes Market Forces estimates they would unleash at least 1.2 billion tonnes of carbon emissions, the equivalent of more than twice Australia’s current annual emissions.

Whitehaven’s banking syndicate of 13 international and Australian banks loaned a combined $1 billion to Whitehaven in February of 2020. NAB and Westpac both participated in the loan, each committing $110 million.

Whitehaven revealed at its 2022 AGM that the company plans to refinance the facility before it matures in July 2023, leaving the door open for NAB and Westpac to provide more finance.

If the banks refinance Whitehaven, it will be a clear example of banks still funding new coal through corporate financing.

Environment & community impacts

In addition to its worsening impacts on the climate, Whitehaven has a long history of destroying the local environment and breaking the law.

Whitehaven’s neighbours, organised by Lock the Gate, have kept a long list of Whitehaven’s environmental breaches, which have threatened local livelihoods and critical habitat for endangered species. The company and its subsidiaries have been found guilty or investigated 35 times and incurred almost $1.5 million in total penalties.

Arguably the most appalling of Whitehaven’s crimes concerns water. The Liverpool Plains are some of the most fertile agricultural lands in New South Wales. Farmers in the region are deeply concerned that Whitehaven’s water use is drying out streams and bores.

Local farmers have been repeatedly outbid on water licences with Whitehaven paying five times the market value at times for water. Worse still, in April 2021, Whitehaven pleaded guilty to taking one billion litres of water during a severe drought in New South Wales.

Both NAB and Westpac say that they consider environmental, social and governance risks when lending to clients. Whether the banks do in fact refinance Whitehaven’s loan this year will be a test of the bank’s policies around climate, environmental and social concerns.

ANZ

Australia’s bank of gas and the biggest lender since Paris

ANZ has been the biggest backer of the fossil fuel industry since 2016, loaning $18.6 billion.

Between 2021 and 2022 alone ANZ gave $4.6 billion to fossil fuels, the most of any of the big four.

ANZ has been Australia’s banking partner of choice for companies seeking to expand the gas sector.

ANZ participated in at least 22 loans and 7 bonds for companies and projects expanding the gas sector. ANZ gave $2.9 billion to the gas industry alone in the last two years.

ANZ loaned $3.6 billion to the coal industry between 2016 and 2022, the most of any Australian bank. $736 million of this came in 2021 and 2022.

To find out more about ANZ visit our ANZ webpage.

Financed emissions targets vs. client’s emissions trajectory

Commonwealth Bank

Door left ajar for increasing fossil fuel lending and new projects

Commonwealth Bank has reversed the trend observed when Market Forces first published Funding Climate Failure.

Between 2016 and 2020, Commonwealth Bank loaned a whopping $14.2 billion to the fossil fuel industry, providing the most of all four banks to fossil fuel expansion projects and companies with plans consistent with the failure of the Paris Agreement.

During 2021 and 2022, Commonwealth Bank came in as the lowest lender to the fossil fuel industry, at $1.6 billion.

Particularly encouraging in this trend was the bank’s reduction in lending to companies with expansionary plans, where Commonwealth Bank also loaned the least of the big four.

However, Commonwealth Bank’s policy leaves the door open to undoing its recent improvements, with no restrictions on corporate finance for companies expanding fossil fuels or project finance for new fossil fuel transport and processing developments.

To find out more about CommBank visit our CommBank webpage.

*Note that the graph below is set from a 2022 baseline, whereas Commonwealth Bank’s target is set from a 2020 baseline. The reason the chart below shows Commonwealth Bank increasing its oil and gas sector financed emissions between now and 2030 is that Commonwealth Bank exceeded its 2030 target in its 2021 reporting year, and has not re-baselined to set a more ambitious target as a result. As it currently stands, Commonwealth Bank’s target would enable the bank to increase its exposure to the oil and gas sector between now and 2030. 

Financed emissions targets vs. client’s emissions trajectory

NAB

Australia’s most regressive bank – a climate laggard trending backwards

When Market Forces published Funding Climate Failure, NAB came in as a distant third behind Commonwealth Bank and ANZ for its lending to the fossil fuel industry, lending $9.5 billion between 2016-2020.

In the last two years NAB has been Australia’s second biggest backer of the fossil fuel industry.

During 2021 and 2022 NAB loaned $4.5 billion to the fossil fuel industry, almost three times as much as Commonwealth Bank and nearly twice the finance provided by Westpac.

NAB’s lending in the past two years was on par with perennial climate laggard ANZ.

To find out more about NAB visit our NAB webpage.

Financed emissions targets vs. client’s emissions trajectory

Westpac

Australia’s third biggest backer of the fossil fuel industry

Westpac is Australia’s third biggest backer of the fossil fuel industry.

Between 2016 and 2020, Westpac loaned the least to the fossil fuel industry of the big four, at $6.7 billion. It has now lost this position to Commonwealth Bank. Between 2021 and 2022, Westpac loaned $2.3 billion, compared to Commonwealth Bank at $1.6 billion.

It is concerning that Westpac has not substantively changed its year-on-year lending to the fossil fuel industry since the signing of the Paris Agreement.

As Commonwealth Bank has now taken legitimate steps to reduce its overall lending, Westpac cannot hide its lack of climate action any longer.

In 2022 alone, Westpac provided finance to Woodside, Santos and to Global Infrastructure Partners in a loan that enabled Woodside to reach a final investment decision on its climate-wrecking Scarborough-Pluto 2 LNG project.

Westpac remains exposed to Whitehaven Coal from a loan in February 2020, where it loaned $110 million. This loan is up for refinancing in July 2023.

To find out more about Westpac visit our Westpac webpage

Financed emissions targets vs. client’s emissions trajectory