12 October 2022
Today, Commonwealth Bank faced a formal proposal from shareholders asking it to demonstrate how the company’s financing would not be used for the purposes of new or expanded fossil fuel projects. Despite trying to appear to be acting on climate change, the bank and its leadership were held to account over its continued financing of new coal, oil and gas projects and the companies building them, like Santos and Glencore.
Commonwealth Bank remains a heavy financier of fossil fuels, having poured tens of billions of dollars into major Australian companies expanding the fossil fuel industry since 2016.
Despite its stated commitments to the Paris Agreement and net-zero emissions by 2050, and the International Energy Agency’s (IEA) conclusion that reaching net-zero emissions globally by 2050 leaves no room for new fossil fuel projects, Commonwealth Bank has failed to rule out further funding for new oil, gas or metallurgical coal projects, or companies engaged in the development of new thermal coal projects. As it stands Commonwealth Bank’s policies are not aligned with efforts to limit warming to 1.5°C, and the Chairman and CEO failed to address this disconnect in today’s meeting with shareholders.
TAKE ACTION! Contact Commbank using the form on this page – tell the bank it must rule out financing the expansion of coal, oil and gas.
Analysis released in 2021 from Market Forces revealed that between 2016 and 2020, Commonwealth Bank loaned more than $14.2 billion to fossil fuels, including $3.06 billion for expanded coal, oil or gas projects. These projects over their lifetime would enable the release of 5.83 billion tonnes of CO2 (equivalent) into the atmosphere, equal to about 12 times Australia’s total 2020 greenhouse gas emissions.
In May 2021, the IEA concluded that reaching net-zero greenhouse gas emissions by 2050 means there should be “no new oil and gas fields approved for development … and no new coal mines or mine extensions are required.” Despite this, since 2021 Commonwealth Bank has been involved in at least 11 more fossil fuel deals with massive expansionary plans. Commonwealth Bank has contributed to deals for Santos, Glencore, and Beach Energy, all of which have plans for new fossil fuel production projects.
For these reasons, Market Forces coordinated hundreds of shareholders to put a resolution to today’s meeting, calling on the bank to stop funding new fossil fuel projects and the companies pursuing them.
Despite investors managing or owning 6% of Commonwealth Bank’s shares – representing almost $10 billion of investment – supporting the resolution, many investors failed to live up to their own climate commitments by supporting the resolution. Any investor claiming to support net-zero emissions by 2050 must realise this means no expansion of the fossil fuel industry, and therefore, back calls for that outcome. Unfortunately, many super funds would have used their members’ money to block this critical climate action.
Tell CommBank to stop financing the expansion of coal, oil and gas!
Shareholder questioning at the @CommBank AGM has drawn a commitment from Chair Paul O’Malley that CBA will not bank companies that fail to produce a #climate transition plan by 2025. But no detail on how CommBank will assess these plans for alignment with a 1.5°C warming pathway pic.twitter.com/2TWTbeWmov
— Market Forces (@market_forces) October 12, 2022
Grassroots and community action
Our friends at 350.org brought plenty of spice to today’s AGM, with signs and flyers outside the start of the meeting. Inside, during new Chair Paul O’Malley’s opening address a choir broke into song, singing a rendition of “Pack up your troubles” with new lyrics asking the bank to stop financing fossil fuels. The Chaser also interrupted CEO Matt Comyn’s speech, attempting to deliver a greenwashing award to CommBank for its recent fossil fuel lending.
Aleksa from the @chaser team tried to deliver the illustrious Greenwashing Award to @CommBank CEO Matt Comyn for his excellent marketing work funding fossil fuels while claiming to care about the climate. This AGM is a shambles. pic.twitter.com/n1gXJH0q1z
— 350Australia (@350Australia) October 11, 2022
A choir just interrupted the @CommBank AGM and the board chair calling for the bank to divest from fossil fuels now now now! #BankOnOurFuture pic.twitter.com/3cdis7tYwO
— 350Australia (@350Australia) October 11, 2022
CommBank’s funding for climate- and community-destroying companies
Despite its commitments to the Paris Agreement and net-zero by 2050, and in the knowledge that achieving these goals leaves no room for new fossil fuel projects, Commonwealth Bank has continued pouring money into companies and projects expanding the coal, oil and gas industry. Not only are these companies wrecking our climate, in many cases they’re also harming local environments and communities.
One of Commonwealth Bank’s most concerning recent deals is the bank’s co-arrangement of a US$1 billion loan to Santos in August 2022.
Santos’ plans are wildly inconsistent with the Paris Agreement. Analysis from the UN Environment Programme finds that limiting global warming to 1.5°C means production of oil and gas must fall by 4% and 3% (respectively) annually from 2020 to 2030, yet Santos plans to increase production by 17% over that timeframe.
In August 2022, Santos reached a Final Investment Decision on the Pikka Phase 1 oil project in Alaska, which will produce an estimated 80,000 barrels of oil per day and won’t achieve first oil until 2026.
Santos is pursuing the highly controversial Narrabri Gas Project in NSW, which expert reviews found would have potential impacts on Aboriginal cultural heritage, water, and wildlife, as well as economic and social impacts. Members of the Gomeroi Nation, the Traditional Owners of the Narrabri region, fear the project would destroy sacred sites, including posing an unacceptable risk to the Great Artesian Basin. These concerns, among others, have compelled Traditional Owners and supporters to gather in the hundreds across capital cities to protest the project, and overwhelmingly vote against entering an agreement with Santos to allow the project to proceed.
The Barossa gas project is located in the waters north of the Tiwi Islands in the Northern Territory. One economist has described the Barossa project as “a CO2 emissions factory with an LNG by-product”. The controversial Barossa project is on hold after Tiwi Islands traditional owners won a federal court challenge against Santos’ project in September this year. The court ruled that Santos had failed to adequately consult Tiwi Islands traditional owners about the project.
Market Forces campaigner, Morgan Pickett, questioned how CommBank’s loan to Santos could be characterised as in line with the Paris Agreement. Unsurprisingly, Mr O’Malley said that he was unable to answer the question as it related to an individual client. Throughout the meeting, CommBank repeatedly refused to outline to shareholders how it reconciles its lending to climate wrecking companies with its commitment to the goals of the Paris Agreement and a 1.5°C scenario.
In March 2021, Commonwealth Bank co-arranged a whopping $16.7 billion loan for Australia’s biggest coal producer, Glencore – a company which is pursuing eight proposed or recently approved new or expanded coal mines in Australia.
The most egregious example of Glencore’s climate destructive plans is the proposed greenfield Valeria coal mine in central Queensland which would see 30,000 hectares of high-value farmland and remnant bushland destroyed to create six open cut pits. Glencore has plans to operate the Valeria mine until 2062, despite the IEA’s net-zero by 2050 scenario confirming there is no room for new coal mines.
Last year, just one month after Commonwealth Bank co-arranged the loan for Glencore, the NSW government granted approval to Glencore to continue operating the open cut Mangoola Coal Mine, which will enable Glencore to extract 52 million tonnes of coal until 2030.
Glencore is currently the subject of a formal “greenwashing” complaint to the Australian Securities Investment Commission and the Australian Consumer and Competition Commission for misleading and deceptive conduct linked to Glencore’s claims regarding its plans to reach net zero emissions by 2050.
When challenged about whether CommBank will continue to lend to thermal coal customers, the bank simply reiterated its existing targets, which don’t rule out lending to companies like Glencore.
Ineffective or ignored policy
Commonwealth Bank’s Climate Report, published earlier this year, spells out the fact that the Bank’s agriculture and home loan portfolios (a much larger proportion of business than fossil fuels) face significant risk from the effects of climate change. Despite this, under its current policies Commonwealth Bank continues to provide finance to projects and companies that are incompatible with efforts to limit warming to 1.5°C. The bank has even set targets that allow it to increase lending to the oil and gas sector over the next eight years, despite the expansion of that sector exacerbating the physical climate risks facing CommBank’s business.
Free, Prior and Informed Consent
Free, Prior and Informed Consent (FPIC) is a principle protected by international human rights standards that states ‘all peoples have the right to self-determination.’ According to its Environmental and Social Framework CommBank says its supports FPIC for “applicable project finance.” The bank leaves out how it would apply FPIC for corporate loans, even if the loans are being used for a project, and also leaves out what the bank will do if a company fails to meet this standard.
Given such toothless policy, the bank was asked several questions on how it applies consent and consultation to several different loan transactions including a corporate loan related to Santos’ Barossa project, a bond arranged for Cheniere’s expansion of the Corpus Christi LNG terminal impacting the Karankawa Kadla tribe in Texas, and the fracking projects being explored in the Beetaloo basin.
In response, Mr O’Malley said the bank’s general approach was to follow CommBank’s Indigenous Advisory Council advice and that the bank is “listening and educating ourselves.” Mr O’Malley then tried to dodge the specific questions regarding a lack of FPIC related to Santos’ Barossa project with general comments on climate targets before remarking that shareholders should judge the bank “on what you see us do.” If CommBank continues to fund Santos and other companies trampling on First Nations rights, it can be sure the community will hold it to account.
COMPANY “TRANSITION PLANS”
Despite its Paris and net-zero commitments, Commonwealth Bank’s current policy allows its climate-wrecking clients such as Santos and Glencore at least another three years to develop transition plans.
This is a huge gap that allows Commonwealth Bank to continue financing clients with expansionary plans for at least the next three years. This point is critical, because what Commonwealth Bank finances in the short-term could lock in decades of high emissions, long after the clients and projects are off the bank’s books.
Any company involved in a new or expanding coal, oil or gas infrastructure project does not, by definition, have a credible transition plan, and its activities are undermining global efforts to limit global warming to 1.5°C.
A concerned shareholder asked how the bank assesses the quality of these transition plans and what the consequences might be for a company that fails to comply.
In response, Mr O’Malley referred shareholders to CommBank’s ‘Glide paths’ for the coal, oil and gas sectors, claiming the bank is aligned with a 1.5°C scenario. Mr O’Malley repeatedly referred to the need for independent methodology guidelines to be published on what Transition Plans should look like, despite the IEA and countless peer reviewed studies already having confirmed there is no room for new coal, oil and gas projects in a 1.5°C-aligned carbon budget.
CommBank’s willingness to continue financing companies pursuing new fossil fuel projects demonstrates how out of line the bank is with what transition plans are needed now to actually reach 1.5°C. Throughout the AGM, Mr O’Malley repeatedly outlined how difficult achieving 1.5°C will be, so why would CommBank make it even more difficult by lending to companies undermining that goal?
OIL & GAS SECTOR TARGETS
Despite making progress in 2021 by reducing its exposure to the oil and gas sector, CommBank has failed to step up its ambition and has effectively taken a step backwards by setting regressive targets that would allow the bank to increase its lending to the sector for the next eight years.
That CommBank wants to appear as a leader on climate change while increasing its exposure to the oil and gas industry is absurd, and a concerned shareholder put a question on the subject to the board.
In response, Mr O’Malley and Mr Comyn pointed to CommBank’s current performance on oil and gas exposure, without addressing the issue that without re-baselining its oil and gas sector targets, CommBank can actually increase its financed emissions in the upstream oil and gas sector out until 2030.
CommBank had a chance to demonstrate climate leadership by increasing the scale of its ambition, but has yet again opted to stand behind its regressive targets in the face of an increasingly narrow pathway to 1.5°C.
Throughout the barrage of questions about the banks’ inadequate climate policies, Mr O’Malley and Mr Comyn repeatedly referred to the bank’s ‘Glide paths’ for the coal, oil and gas sectors to claim CommBank is aligned to the Paris Agreement and a 1.5°C scenario.
The real concern at this year’s AGM wasn’t CommBank’s ‘Glide paths’ but the fact that its current policies allow the bank to finance companies pursuing new fossil fuel projects – that will lock in decades of emissions – for at least another three years before expecting them to produce transition plans.
Market Forces campaigner, Pablo Brait, challenged the board over its glide paths and commitment to the Paris Agreement, asking “Why commit to 1.5°C if your policies undermine 1.5°C scenarios by supporting new fossil fuel projects? Why just not be honest and say that we’re not aligned, but maybe we will be one day.”
Mr O’Malley responded that he believes CommBank has a different interpretation of how to get to 1.5°C, and that there are many scenarios that could be followed to get there, although made sure to mention it will be “science-led”. It’s not clear what science CommBank is following to enable it to finance new fossil fuel projects when the IEA, IPCC and countless climate studies have made clear that this is not possible in a 1.5°C scenario.
Mr O’Malley told Pablo “in 12 months’ time, there will be further disclosure in our climate report… as to the progress we’re making”. Pablo Brait again told the board “In 12 months time, you could have locked in emissions from gas fields and coal mines for another 50 years.” Mr O’Malley said “we need to be accountable for the questions that you’re asking… and we will be.” Market Forces and the community members we work with will be ensuring that accountability.
Climate impacts already being felt
People all over the world are already experiencing the impacts of climate change, from the recent destruction wrought by Hurricane Ian in Florida, to catastrophic flooding in Pakistan and the East Coast of Australia, and the unprecedented heat waves and bushfires the world over in the last few years.
In its own 2022 Climate Report, CommBank highlighted the risk that climate change poses to its own loan portfolio. CommBank is Australia’s largest home loan lender with mortgages being 62% of its entire portfolio. The bank’s own report says that 3% of this home loan portfolio is highly exposed to acute physical risks from climate change, representing $31 billion dollars of lending.
This is CommBank’s own loan book, but also Australian homes and livelihoods.
Jack Egan, bushfire survivor who lost his home in the catastrophic fires of 2019, shared his story with the bank’s leadership and called on the bank to do better from both a moral and financial perspective:
In response, Mr Comyn reiterated that fossil fuel lending makes up a small portion of the bank’s financing, but also said that “we don’t think it’s a better outcome for the country to remove all financing” for fossil fuels. This posturing misrepresented the question, which was whether CommBank will continue funding the companies that are making these extreme climate events worse by expanding fossil fuels, endangering Australians homes, and the bank’s home loan portfolio. Sadly, it seems CommBank and many of its big investors still have their heads in the sand when it comes to the impacts of climate change and the incompatibility of new fossil fuel projects with a 1.5°C warming limit.