Commonwealth Bank

In August 2022 CommBank re-financed a loan for Santos that was related to the climate-wrecking Barossa gas project.

This loan in particular was mired in controversy due to the fact that it occurred whilst the Barossa gas project was being disputed by Tiwi Islands Traditional Owners. Read all about this loan.

Free, Prior and Informed Consent (FPIC) is a right protected by international human rights standards’ According to its 2023 Environmental and Social Framework CommBank says it supports FPIC for “applicable project finance.”

The bank received a formal human rights complaint from Traditional Owners in April 2023 alleging that their right to FPIC had been violated. The complaint demands that CommBank withdraw from its current loan to Santos and commit to not financing the associated Darwin LNG project, which would process Barossa gas.

CommBank has a history of funding Santos’ environmentally destructive business plans. Of the big four banks, CommBank has loaned the most to Santos since 2016, more than a whopping $1 billion.

It’s still not clear how CommBank could have assessed the environmental, social and economic impacts of Santos’ proposed projects, including Barossa, to be in line with the Paris Agreement or CommBank’s human rights policies. That’s why it’s crucial CommBank changes its policy to rule out financing environmentally destructive companies like Santos.

In March 2021, CommBank took part in a giant $16.7 billion loan to Australia’s biggest coal-miner, Glencore.

Glencore is “one of the world’s largest producers and exporters of seaborne traded thermal and coking coal.” It currently operates 17 coal mines across New South Wales and Queensland and is pursuing an extension for the Hunter Valley Continued Operations project, which is the largest coal mining proposal ever put forward in NSW. 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 2024 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 extremely concerning that Glencore currently slips through the cracks of CommBank’s policy.

CommBank will require oil and/or gas producing, metallurgical coal mining, and coal-fired power generation clients to have published climate change transition plans by 2025 in order to receive corporate or trade finance or bond facilitation. A notable gap in the list of fossil fuel clients CommBank will require transition plans from is thermal coal mining companies.

While the bank has committed to exiting thermal coal completely by 2030, its policy doesn’t require companies in this sector to have transition plans in place by 2025 to keep receiving finance. This could allow six more years of continued finance to thermal coal companies misaligned with global climate goals.

As Glencore is pursuing coal mine extensions, there is a clear risk that CommBank’s current policy settings could allow it to finance coal expansion until the end of this decade. What CommBank finances now is critical, because money loaned today can enable the construction of coal mines that operate past 2050, even if CommBank is completely out of the thermal coal sector by 2030.

Only having a policy that restricts ‘project finance’ for new coal mines is also inadequate. A report by Global Energy Monitor released in October 2022 found that almost 80% of the financial pipeline for new coal projects is coming from ‘general corporate finance’, not dedicated project finance.

CommBank must close this obvious loophole and deny finance to companies with plans to develop new or expanded coal mines or extend the life of existing mines. Otherwise, CommBank risks providing finance to projects that condemn us to climate catastrophe.

Cheniere Energy proudly claims it is the largest producer of liquefied natural gas in the United States and the second largest LNG operator in the world. Because of its massive gas expansion plans, Cheniere is amongst the top 190 companies expanding coal, oil and gas in the world. We refer to these companies as the ‘Climate Wreckers Index’.

CommBank has a history of supporting Cheniere Energy since the Paris Agreement. On 22 May 2018 CommBank loaned $234.8 million to one of Cheniere’s new projects, Corpus Christi, a massive new liquefied gas (LNG) facility in Texas. Market Forces estimates the Corpus Christi LNG project, which started operation in November 2018, will result in 775MtCO2-e over its lifetime.

In February and September 2021, CommBank was again involved in arranging finance for Cheniere when it took part in arranging two massive bonds worth a combined $3.5 billion. CommBank itself arranged $94.5 million for Cheniere across these two deals.

In November 2023, CommBank took part in a $1.25 billion loan to APA Group. While part of this loan will be used to fund APA’s acquisition of Alinta Energy’s existing Pilbara gas assets, it will also be used for ‘general corporate purposes’. The loan will not mature in full until 2033.

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 enable fracking in the Beetaloo Basin. 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.

APA Group, as a pipeline company, is not required to have a transition plan under CommBank’s current policy framework. This is a massive loophole when the pipeline infrastructure APA is planning to build will be used to enable a project that CommBank would never be able to fund directly.

CommBank must require all of its fossil fuel clients to have credible emissions reductions plans, otherwise it risks enabling them to develop projects completely out of line with its own climate commitments.

The science

• IEA Net Zero Emissions by 2050 scenario (NZE): No new thermal or metallurgical coal mines or extensions
• IPCC (AR6): Emissions from existing fossil fuel infrastructure without additional abatement would exceed the total limit of emissions in 1.5°C pathways with no or limited overshoot

Thermal coal:

Project-level finance policy: Rules out project-level finance to new or expanded thermal coal mines.

Corporate finance policy: No policy to rule out corporate lending to companies that are developing new, expanded or lifetime extensions of thermal coal mines.

Bonds policy: No policy to rule out arranging bonds to companies that are developing new, expanded or lifetime extensions of thermal coal mines.

Clients pursuing new, expanded, or thermal coal mine lifetime extensions: Glencore

Which banks are they lagging behind?

Lots of banks including:

Westpac will no longer provide corporate finance or ‘bond facilitation’ to companies earning more than 15% of their revenue from thermal coal mining, exiting any relationship with existing clients by 2025.

Barclays no longer provides general corporate purposes financing to clients engaged in opening new thermal coal mines or material expansion of existing thermal coal mines.

Standard Chartered will not provide financial services to companies that acquire or invest in thermal coal mines or develop new thermal coal assets.

DWS has declared that it will not make ‘new investments’ in companies that are investing in new or additional thermal coal mining, and will not renew existing investments in those companies.

Metallurgical coal:

Project-level finance policy: No policy to rule out project finance for new, expanded or lifetime extensions of metallurgical coal mines.

Corporate finance policy: Doesn’t rule out corporate lending to companies building new and expanded metallurgical coal mines, or mine lifetime extensions.

Bonds policy: Doesn’t rule out arranging bonds for companies building new and expanded metallurgical coal mines, or mine lifetime extensions.

Clients pursuing new, expanded, or metallurgical coal mine lifetime extensions: Glencore

Which banks are they lagging behind?

Project finance:

HSBC will not provide new finance to any client for the specific purposes of, or new advisory services in connection with, activities that include new metallurgical coal mines.

Westpac will not provide project finance for greenfield (new) metallurgical coal mines.

Société Générale will not provide dedicated financial transactions, products and services when the underlying activities are: Metallurgical coal extraction activities.

Corporate finance and bonds:

La Banque Postale has committed to not provide finance to coal companies that are developing new coal-related projects.

The science

• IEA NZE: No new coal power projects
• IPCC (AR6) limited overshoot 1.5°C pathways: No new fossil fuel infrastructure (See above)

Project-level finance policy: Rules out project-level finance to new thermal coal-fired power plants.

Corporate finance policy: Policy rules out corporate lending to companies expanding their coal-fired power generation capacity (only applies to companies that generate more than 25% of their electricity from coal).

Bonds policy: Policy rules out corporate lending to companies expanding their coal-fired power generation capacity (only applies to companies that generate more than 25% of their electricity from coal.)

The science

• IEA NZE: No new long lead time conventional oil and gas projects
• IPCC (AR6) limited overshoot 1.5°C pathways: No new fossil fuel infrastructure (See above)

Project-level finance policy: Rules out project finance to new or expanded oil and gas fields.

Corporate finance policy: No policy to rule out corporate lending to companies pursuing new and expanded oil and gas fields.

Bonds policy: No policy to rule out arranging bonds for companies pursuing new and expanded oil and gas fields.

Clients pursuing new and expanded oil and gas fields: Santos, Norwegian Energy Company, Beach Energy.

Which banks are they lagging behind?

Corporate finance:

Danske Bank has decided not to offer long-term financing or refinancing to E&P oil and gas companies that intend to expand supply of oil and gas beyond what was approved for development by 31st of December 2021.

NatWest has committed to stop lending to and underwriting bonds for major oil and gas producers unless they have a Credible Transition Plan aligned with the 2015 Paris Agreement.

Crédit Mutuel has committed to not financing any oil and gas company that does not have a planned year-on-year oil and gas reduction trajectory.

The science

• IEA NZE: “a global [LNG] supply glut forms in the mid-2020s and under construction projects are no longer necessary.” (p. 139)
• IPCC (AR6) limited overshoot 1.5°C pathways: No new fossil fuel infrastructure (See above)

Project-level finance policy: No policy to rule out project finance to LNG projects servicing new or expansionary oil and gas fields

Corporate finance policy: No policy to rule out financing to companies pursuing new and expansionary LNG projects

Bonds policy: No policy to rule out arranging bonds for companies pursuing new and expansionary LNG projects

Clients pursuing new and expanded LNG projects: Santos

• IEA NZE: No new long lead time conventional oil and gas projects
• IPCC (AR6) limited overshoot 1.5°C pathways: No new fossil fuel infrastructure (See above)

Project-level finance policy: Rules out project finance to pipelines servicing new or expanded oil and gas fields.

Corporate finance policy: No policy to rule out corporate lending companies developing pipelines for new and expanded oil and gas fields.

Bonds policy: No policy to rule out arranging bonds for companies developing pipelines for new and expanded oil and gas fields.

Clients pursuing pipelines for new and expanded oil and gas fields: APA Group

Market Forces reports lending differently to the banks

Each of the big four banks report their fossil fuel exposures based on their lending portfolio to the industry. However, the banks use different reporting methodologies, with some reporting in more detail than others in terms of total exposures to the fossil fuel supply chain.

Market Forces reports on the lending that banks participate in each year, including refinancing of existing deals. We consider each refinancing a conscious decision by a lender to continue supporting a company or project, and lending groups can and often do change upon refinancing and we want to capture this.

In addition, through refinancing existing loans for a new fixed term, a bank is making money available to a fossil fuel company that it otherwise would not have if the bank had decided to not refinance.

When banks report on exposure however, refinancing will not show up as ‘additional exposure’ unless the bank decides to commit more money, as that money is already on the bank’s books. Whilst this approach is legitimate, we believe it doesn’t capture the extent of support the banks provide to companies by refinancing, which is essentially to provide more money to fossil fuel companies for longer periods of time.

CommBank changed its exposure reporting methodology in 2023, and now reports its exposure to:

Oil and gas: 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: Includes “thermal coal mining, metallurgical coal mining, and coal terminals. Commonwealth Bank also reported its ‘Rail transport’ exposure of $1.8bn, but it’s not clear if this includes rail transport for coal.”

CommBank also reports its exposure to non-renewable power generation at $1.9bn, but no further breakdown has been provided.

As CommBank’s methodology reporting change in 2023 makes further retrospective year-on-year reporting non-comparable, we have only included its reported exposure in 2022 and 2023.