Banking Climate Failure

The bond market is a cornerstone of global finance, and an increasingly popular form of raising funds for fossil fuel companies. When banks arrange bonds, they use their large networks of financiers to help the fossil fuel client find investors willing to provide the funding.

Alarmingly, bonds have doubled as a source of funding for energy companies in the past decade. The recent ‘Banking on Climate Chaos’ report found that corporate bonds now account for 39% of fossil fuel finance arranged by the world’s 60 largest banks. When it comes to the big four Australian banks, our data shows 38% of finance they arranged for fossil fuels in 2023 was in the form of bonds.

The significance of bonds is particularly pronounced in the thermal coal sector. As traditional bank lending for thermal coal has become increasingly restricted, bonds have become a key source of funding for coal companies seeking to finance their expansion projects. Coal expansionist companies now raise 2.5 times more capital through bond finance than through bank loans. Between 2021-2023, bond underwriting accounted for 78% of total coal financing, according to German clean finance advocacy organisation Urgewald.

ANZ and NAB have no current restrictions on arranging or underwriting bonds for companies with fossil fuel expansion plans, while CommBank and Westpac have only limited restrictions in place.

Fossil fuel bonds in 2023

The Paris Agreement was signed nearly nine years ago, and the urgency of the climate crisis has only increased since then as disasters including bushfires, floods, heatwaves and droughts have become more severe and frequent.

Despite the urgent need to transition away from fossil fuels, Australia’s major banks have taken a meandering approach to their fossil fuel finance. The big banks have failed to hold their coal, oil and gas clients to account, while financially enabling their destructive expansion plans.

However, there may be light at the end of the tunnel for the thousands of community members that have been demanding real climate action from our major banks. In 2023, all big four banks announced that from next year they will require fossil fuel companies to produce credible transition plans. A transition plan is how companies demonstrate their business plans are consistent with a safe climate and aligned with the goals of the Paris Agreement.

What does that mean for climate wreckers? Companies pursuing massive new and expanded coal, oil and gas projects incompatible with limiting global warming to 1.5°C, like Santos, Woodside, and Glencore must surely fail the banks’ test and so won’t be eligible for more finance from 2025.

But some grey area remains, and we need to ramp up the pressure now to get the banks to publicly disclose exactly how they’re going to assess all of their fossil fuel clients for alignment with 1.5°C, and commit to not funding companies that are incompatible with a safe climate. This can’t just apply to companies extracting the coal, oil and gas themselves, but all companies enabling fossil fuel expansion throughout the value chain, including gas infrastructure and pipeline companies such as APA Group, GE Vernova, and JERA.

The last few years have shown that ANZ and Westpac are willing to fund companies responsible for a massive buildout of new gas projects in Asia. The banks are financing projects and companies ranging from the new gas fields and pipeline developers in Australia, to gas-fired power plants in Asia.

Disclaimer: This map is an approximate guide only and does not necessarily reflect the exact locations of planned fossil fuel developments and associated infrastructure.

Asia is being aggressively pursued as a growth market for gas power projects and infrastructure. According to Global Energy Monitor, a staggering 63% of the world’s proposed new gas power is in Asia. Despite opposition from local communities, the fossil fuel industry is pushing costly and climate destroying projects in this region, and it’s being enabled by ANZ and Westpac.

In just the last two years, ANZ and Westpac loaned over $700 million as part of two loans related to two of Australia’s biggest new fossil gas export projects – Woodside’s Scarborough and Santos’ Barossa gas project. They’ve also loaned over $300 million for ‘general corporate purposes’ to both companies, and even helped arrange a $1.3 billion, ten-year bond for Santos in September 2023. ANZ and Westpac are enabling Australian gas companies to extract new gas and export most of it overseas, but it doesn’t stop there.

Then there’s APA Group, Australia’s largest gas pipeline operator. ANZ and Westpac both took part in a $1.25 billion loan to APA in November 2023, and also helped arrange a $835 bond for the company that same month. APA is planning to construct several pipelines to support extensive fracking in the Beetaloo Basin, one of the biggest proposed gas projects in Australia’s history, with most of the gas destined for export.

In October 2023, both ANZ and Westpac contributed a combined $226 million to Japanese energy giant, JERA as part of a $2.3 billion loan. JERA has stakes in both Barossa and Scarborough, and is involved in a staggering amount of new gas power projects in Bangladesh and Vietnam. JERA’s gas expansion tentacles include a carbon bomb in the precious environment of Chattogram, south east Bangladesh. And it gets even worse for the climate.

In March of this year, ANZ and Westpac were both involved in a $9.2 billion loan to GE Vernova. The global power giant is one of the world’s biggest contributors to coal and gas power plants and its business strategy includes building an enormous amount of new gas power plants in Bangladesh and Vietnam. In the Chattogram region of Bangladesh alone, gas or LNG projects with GE involvement would add approximately 430 million tonnes of carbon dioxide equivalent (CO2-e) to the atmosphere throughout the plants’ operational lives, over four times the country’s total CO2 emissions in 2022.

This kind of financing activity calls into question not only ANZ and Westpac’s commitments, but the kind of world and economies they want to be shaping. These companies are demonstrating their intention to ensure that the ‘Asian growth market’ is locked into dependence on outdated and harmful technologies instead of developing clean, renewable energy. ANZ and Westpac are bankrolling climate havoc across Asia.

In the eight years since the global Paris Agreement to limit climate change was signed, the big four Australian banks have loaned a whopping total of $61.1 billion to fossil fuels, including:

• $24.2 billion to companies expanding fossil fuels
• $9.5 billion to fossil fuel expansion projects

Fossil fuel lending 2016 – 2023

Fossil fuel lending 2016 – 2023 (by type)

Most fossil fuel deals from Australia’s big four banks in 2023 were for companies with fossil fuel expansion plans. But in that list, there are a few that stand out as the worst deals due to the sheer size of these companies’ fossil fuel expansion plans and associated human rights controversies for many of these projects.

1. JERA Global Markets

In October 2023, ANZ and Westpac loaned $125 million and $101 million, respectively, to JERA Global Markets as part of a $2.3 billion loan related to the company’s LNG business. JERA has some of the biggest gas expansion plans in the world. Some of its dirtiest new proposed LNG projects include:

• Barossa: JERA owns a 12.5% stake in Santos’ destructive Barossa gas project, as well as a 6.1% stake in its associated gas processing plant, Darwin LNG. The issues with Barossa have been well-documented – in 2023 ANZ and Westpac faced formal human rights complaints from Tiwi and Larrakia Traditional Owners over their involvement in a loan related to the project.
• Scarborough: In February 2024, JERA bought a 15.1% stake in Woodside’s climate-wrecking Scarbrough gas field off the coast of North-Western Australia. The gas produced from Scarborough would, when burned, see nearly 700 million tonnes of CO2 enter the atmosphere, almost 1.5 times Australia’s annual emissions.
• Freeport LNG Expansion: JERA owns a 25.7% stake in the Freeport LNG project in Texas, USA. Freeport LNG is expanding its capacity, which would make the facility at least the fourth biggest LNG project in the world.

JERA is a major player in the Japan-led fossil gas expansion in Asia, pursuing five LNG import terminals and LNG to power projects with nameplate capacity of 11.6GW in Bangladesh and Vietnam, effectively trying to lock these countries into dirty and expensive fossil fuels instead of renewable energy. Perhaps most egregious of these examples is the pursuit of carbon bomb LNG projects in the Chattogram region of Bangladesh.

2. APA Group

In November 2023, ANZ, CommBank, NAB and Westpac all took part in a $1.25 billion loan to APA Group. ANZ, CommBank and NAB loaned $50 million each, while Westpac loaned $80 million. While part of this loan was to fund APA’s acquisition of Alinta Energy’s existing Pilbara gas assets, it will also be used for ‘general corporate purposes’.

The loan does not need to be repaid in full until 2033, during which time APA threatens to unleash massive climate pollution from the Beetaloo gas basin.

In 2023, APA Group signed preliminary agreements with the leading developers of the Beetaloo basin, Empire Energy and Tamboran Resources, to construct pipelines that would light the fuse on the Beetaloo carbon bomb. Market Forces analysis estimates Beetaloo gas would create end-user emissions of 1.1 billion tonnes of CO₂-e, more than the emissions from Woodside’s Scarborough, Trion and Sangomar projects combined.

Traditional Owners including the Nurrdalinji Aboriginal Corporation, as well as local farmers and landholders, have voiced vehement opposition to the Beetaloo fracking plans, including raising concerns about risks to groundwater in the Cambrian Limestone Aquifer, which sustains local livelihoods and ecosystems.

In September 2023, independent expert and UN Special Rapporteur Marcus Orellana, criticised the Beetaloo Basin gas plans over climate, human rights and environmental concerns. A full report will be published in September 2024.

Protesters call on APA to not enable fracking in the Northern Territory. Photo credit: GetUp

3. Santos

In September 2023, ANZ and WBC were again involved in arranging finance for Santos, this time taking part as co-placement agents for a $1.3 billion bond. Santos sanctioned the new Pikka oil field in August 2022, is targeting a final investment decision on Papua LNG in 2025, and is targeting final approvals on three other new oil and gas projects. Santos plans to increase production 16% between 2022 and 2028, while the latest International Energy Agency Net-Zero by 2050 Scenario projects global oil and gas production must fall 19% by the end of this decade.

This deal was particularly egregious from ANZ and Westpac as just five months prior they had received human rights grievances from Larrakia and Tiwi Traditional Owners for their involvement in a $1.8 billion loan related to the Barossa gas field Santos is currently developing. ANZ was still considering the complaint at the time, while Westpac had effectively dismissed the concerns without engaging with the Traditional Owners. Despite all of this, ANZ and Westpac went ahead and arranged more money for Santos and its destructive gas expansion plans.

After much public pressure, and appearances at Westpac’s AGM in December 2023, Tiwi Traditional Owners Pirrawayingi Puruntatameri and Simon Munkara drew a commitment from Westpac CEO, Peter King to visit the Tiwi Islands to discuss the human rights complaint and what is at stake if Barossa goes ahead. One week later at its AGM, ANZ CEO, Shayne Elliot made the same commitment. Shamefully, ANZ recently rejected the human rights complaint on the basis that Santos ‘had not consented to participate in the process’.

Tiwi Traditional Owners protest Santos’ Barossa gas project in Japan.

4. Glencore

ANZ arranged a whopping $784 million for coal giant, Glencore, as part of a $3.9 billion bond in September 2023. Glencore is “one of the world’s largest producers and exporters of seaborne traded thermal and coking coal.” The company is also pursuing an extension for the Hunter Valley Continued Operations project, which is the largest coal mining proposal ever put forward in New South Wales. The proposed continuation of the mine would see mining continue until 2050, with emissions estimates of up to 1.2 billion tonnes of CO2-e, more than 2.5 times Australia’s current annual emissions.

At a recent Australian Senate Inquiry into Greenwashing, a representative of Glencore openly admitted that “we do not make any claim to be aligned with the Paris Agreement”. Based on Glencore’s plans to keep mining coal for decades, anyone could see that was the case. But it’s an indictment on ANZ that it will still fund a coal-mining company that openly admits it’s not aligned with global climate goals that ANZ claims commitment to.

ANZ has no restrictions on financing metallurgical coal mining, and only weak requirements for thermal coal mining companies.

5. BHP

In February 2023, ANZ, NAB and Westpac participated in a $4 billion bond for BHP, each contributing over $40 million. As one of the world’s largest and most diversified mining companies, BHP has the opportunity, and the responsibility, to set a global example by managing down its fossil fuel business. It is more than capable of this, as demonstrated with its plans for the Mount Arthur mine.

Instead, the company has continued to sell off its dirty assets to pureplay fossil fuel companies with no plans to align their own business with the climate efforts of the rest of the world. While this may reduce BHP’s emissions in its own reporting, the impact in the real world will almost certainly be worse. With these mines in the hands of companies whose sole focus is fossil fuel extraction, their chance to be managed down is gone.

BHP has been selling some of its coal mine assets in recent times, including two of its coal mines to Australia’s largest pure play coal miner and climate-wrecker Whitehaven Coal in late 2023. But even after that sell down, BHP will still produce 36 million tonnes of coal per year, remaining one of the largest producers in Australia.

BHP has plans to mine coal for many years to come, and is seeking approval for two greenfield coal expansion projects at Red Hill and Saraji East, and has applied to extend its Peak Downs metallurgical coal mine by an additional 93 years.

BHP can be a leader in the transition away from fossil fuels, but its coal expansion plans and the massive emissions they would generate are incompatible with global climate goals. ANZ, NAB and Westpac must ensure BHP abandons its coal expansion strategy before providing or arranging further funding.

While overall fossil fuel lending was down in 2023, ANZ’s fossil fuel finance, and weak policies, are a major concern. ANZ’s policies for assessing climate risk are quite clearly inadequate as an overwhelming majority of high-risk deals continue to be approved even when escalated internally.

In its 2023 financial year, ANZ escalated 22 high-risk ESG transactions to a senior executive committee, which approved 19 of those high-risk deals. Then in early 2024, ANZ loaned hundreds of millions across three deals to climate wreckers – GE Vernova, Siemens Energy and San Miguel corporation in quick succession, indicating this climate laggard has no intention of ceasing its support for fossil fuel expansion.

GE Vernova

In March 2024 ANZ and Westpac were involved in a whopping $9.2 billion loan to GE Vernova. This loan coincided with General Electric spinning off GE Vernova, a company specialising in the energy sector.

Despite the company’s name meaning “new green”, it has vast fossil fuel interests and its business strategy includes building out an enormous amount of new LNG power plants in Bangladesh and Vietnam. In the Chattogram region of Bangladesh alone, gas or LNG projects with GE involvement would add approximately 430 million tonnes of carbon dioxide equivalent (CO2-e) to the atmosphere throughout the plants’ operational lives, over four times the country’s total emissions in 2022.

Because GE Vernova is involved in gas-fired power generation and supplying equipment to gas power stations (rather than the extraction of the gas itself), it is exempt from ANZ’s and Westpac’s requirement that certain fossil fuel customers have a Paris-aligned transition plan to continue receiving finance. That means ANZ and Westpac could carry on funding GE Vernova indefinitely despite its prolific role in the massive gas expansion planned in the Asia Pacific region. This clearly shows that these banks’ existing policies are not good enough.

Bangladeshi artists and diaspora Bangladeshis from the US joined Market Forces to call on GE Vernova to pull out of its gas expansion plans and focus on backing renewable energy instead, with actions taking place in Boston and New York.

Siemens Energy

In February 2024 ANZ was involved in a $6.6 billion loan to Siemens Energy, the second largest gas turbine manufacturer in the world, just behind GE Vernova.

Siemens Energy is involved in roughly 10GW worth of new gas and LNG power station expansion projects, including the Payra LNG power station in Bangladesh, part of the dirty and expensive LNG power explosion proposed in the country. Siemens Energy also supplied equipment to TotalEnergies’ Mozambique LNG project, a project which has been marred by human rights controversies ever since its inception.

San Miguel Corporation

In early 2024 ANZ loaned $172 million to San Miguel Corporation as part of a $3.1 billion loan with other banks. The Institute of Energy Economics and Financial Analysis (IEEFA) has raised massive red flags associated with San Miguel’s fossil fuel-oriented growth strategy.

The company is building new coal-fired power plants and aims to add 1.9GW of coal-fired power capacity and 1.3GW of gas-fired capacity by the end of 2025. In addition, San Miguel has over 10GW of gas power projects proposed in the medium to long-term. That’s almost the same amount of gas-fired capacity currently installed in the entire Australian National Electricity Market.

San Miguel is developing nearly 7.5 times more fossil fuel power capacity than its peer company, Aboitiz Power, in the Philippines, and renewable energy will only account for 15% of the company’s generation capacity in 2025. For comparison, in 2025 renewables account for over 40% of electricity supply in the IEA’s Net-Zero by 2050 Scenario.

Baker Hughes

In November 2023, ANZ participated in a $4.6 billion loan to Baker Hughes, a company supplying equipment to several massive fossil gas expansion projects such as the LNG processing plant for Woodside’s Scarborough gas field and Venture Global LNG’s Plaquemines project.

Located in Louisiana off the coast of the Gulf of Mexico, the Plaquemines LNG project would be the second largest LNG export facility in the United States. In 2023, Venture Global LNG announced its plans to increase its LNG export capacity by adding 30 million tonnes per annum, more than the largest LNG export terminal in the world. Baker Hughes has signed an agreement with Venture Global to supply the equipment needed for this enormous fossil gas expansion.

Under ANZ’s policy, engineering, procurement and construction (EPC) contract companies like Baker Hughes will not be required to produce a transition plan to continue receiving finance, despite their pivotal role in constructing new fossil fuel projects that unleash decades of harmful emissions. If this gap isn’t closed, ANZ could continue to fund the expansion of the fossil fuel industry.

We have tried to capture as much information as possible in this study, but a lack of transparency about fossil fuel finance means that the financing data featured in this report likely only represents a partial picture.

The banks in this analysis all report on their ‘fossil fuel exposure’, which is the total amount ‘on their books’ on the reporting date.

However, the reporting methodologies of the banks are not consistent. Some banks report their exposure to the full fossil fuel value chain and some only report exposure to certain segments. ANZ and NAB report only their ‘Exposure at Default’ (EAD), which is the total amount of a loan the client has already drawn. CommBank and Westpac report the more comprehensive ‘Total Committed Exposure’ (TCE), which is the total amount they’ve committed, regardless of the amount of that commitment the client has drawn on the reporting date.

These inconsistencies make cross-bank exposure comparisons difficult, but in the interests of transparency we have also published each of the banks reported fossil fuel exposure at the end of FY2023, along with the limitations in each approach.

ANZ

Source: ANZ 2023 Climate-Related Financial Disclosures
Exposure reported as ‘Exposure at Default’ as of 30 September 2023.

• Oil and gas: $15.5bn Includes “all of the oil and gas value chain such as exploration, extraction, transport, refining and retail”.
• Coal: $0.9bn Includes thermal and metallurgical coal mining.
• Total reported: $16.4bn

ANZ reported $16.4bn in fossil fuel exposure in FY2023. However, ANZ also reported $13.5bn in exposure to ‘Electric Utilities’ which “includes exposures to electricity generators that own or operate a mix of thermal and renewable generation assets as well as transmission and distribution infrastructure.” While no breakdown has been provided of the mix of fossil fuel/renewables electric utilities exposures, the presence of fossil fuel electric utilities in ANZ’s exposure means that exposure to fossil fuels is certainly higher than the $16.4bn reported.

Commonwealth Bank

Source: CommBank 2023 Climate Report
Exposure reported as ‘Total Committed Exposure’ as of 30 June 2023.

• Oil and gas: $7.9bn Includes “Oil and gas upstream exploration and production, petroleum refining, automotive fuel retailing, petroleum product wholesaling and marketing, gas supply, pipeline transport, oil and gas shipping (including FPSO), and LNG terminals.”

• Coal: $1.4bn Includes thermal coal mining, metallurgical coal mining, and coal terminals.

• Non-renewable power generation (breakdown not provided): $1.9bn

• Total reported: $11.2bn

NAB

Source: NAB 2023 Full Year Results Investor Presentation
Exposure reported as ‘Exposure at Default’ as of 30 September 2023.

• Oil and gas: $3.04bn Includes Oil and Gas Extraction, and gas-fired power generation.

• Coal: $0.45bn Includes thermal coal mining, metallurgical coal mining, coal-fired power generation.

• Other/mixed fuel (non-renewable): $1.49bn NAB does not report its exposure to the full fossil fuel value chain, leaving out projects such as coal terminals and gas pipelines.

• Total reported: $4.98bn

Westpac

Source: Westpac 2023 Climate Report
Exposure reported as ‘Total Committed Exposure’ as of 30 September 2023.

• Oil and gas: $7.4bn Includes “Oil and Gas Exploration, Oil and Gas Extraction and Terminals, Oil and Gas Distribution and retail, Fuel retailing, and Oil and Gas refining.”

• Coal: $0.6bn Includes “Coal ports, Thermal coal mining, Metallurgical coal mining, and Metallurgical coal mining in diversified miners.” Westpac also reported its exposure to ‘Transport- Rail Transport (inc. coal transport)’ as just over $2bn, but didn’t disclose specifically how much of this is for coal rail transport.

• Fossil fuel power generation: $0.8bn Includes generation from “Gas; Black Coal; Brown Coal; Liquid fuel.”

• Total reported: $8.8bn