13 October 2020
Today’s annual general meeting (AGM) heard from Commonwealth Bank shareholders who clearly feel the bank isn’t living up to its climate claims and commitments, especially considering its funding for expansion of the gas industry.
Gas lending incompatible with the Paris Agreement
In August 2019, CommBank committed to “only [provide] Banking and Financing activity to New oil, gas or metallurgical coal projects … if in line with the goals of the Paris Agreement”. However, since then CommBank has made numerous loans to projects that expand the gas industry despite such expansion being inconsistent with the Paris Agreement.
Shareholder Guy Abrahams wrote to CommBank in June, accusing the bank of breaching its climate policy by making the gas loans and asking for further information about these loans, including how they were assessed against the Paris agreement.
Mr. Abrahams attended the meeting to ask, once again, how the bank assesses whether or not a project is consistent with the climate goals of the Paris Agreement, including the steps in the assessment process and who (at the bank) is responsible for each step:
Tell CommBank: 1.5 degrees means no expanding the fossil fuel industry!
Chairman Catherine Livingstone’s response failed to articulate a set of steps and responsibilities that could reasonably be expected of a process used to determine compatibility with the Paris Agreement.
Instead, Livingstone admitted that the bank’s assessment is based upon “the extent that we believe the proposal will result in a net reduction of emissions”.
The notion that new or expanded fossil fuel projects could somehow ‘reduce’ emissions is absurd for obvious reasons, not least because 25 lead scientists at Australian universities in August stated:
To meet the upper Paris goal (‘well below 2C’), we must achieve net zero emissions by 2040-2050. This requires a rapid phase-out of existing fossil fuel infrastructure, leaving no room for expansion of the gas industry.
The time has passed for any new fossil fuel infrastructure, including the proposed expansion of the gas industry in Australia.25 leading scientists at Australian universities, 25 August 2020
Based upon Livingstone’s vague description, it’s unclear whether “the extent that [Commonwealth Bank] believe[s] the proposal will result in a net reduction of emissions” is the bank’s only consideration when assessing compliance with the Paris Agreement. If it is, this raises serious concerns about whether Commonwealth Bank has applied and is properly applying the policies contained in its Environmental and Social Framework.
In light of scientists and scientific evidence concluding that there’s no room to expand the gas industry if we’re to achieve the climate goals of the Paris Agreement, the bank was asked whether it accepts these findings:
Livingstone’s answer was typically vague and evasive. Instead of addressing the question directly, Livingstone told shareholders the bank supports gas and that “the hope is that we can eventually move to renewables”. Livingstone failed to articulate why the bank would only hope for such an occurrence rather than actively facilitating it, and why it only hoped for this to occur ‘eventually’ given that renewable energy is a financially and commercially competitive source of energy generation today.
Ongoing finance for ‘out of line’ companies defies logic
Market Forces data shows that from 2016-2019, CommBank loaned $1.8 billion to a group of 9 large Australian companies whose business plans are out of line with the Paris Agreement because those companies are either:
- expanding the scale of the fossil fuel sector; and/or
- relying on scenarios consistent with the failure of the Paris Agreement to justify their future business prospects.
When asked to explain how CommBank justifies continued funding for such companies in light of the bank’s support for the Paris Agreement, Livingstone said the bank “look[s] at the net reduction in emissions that lending might enable”. Aside from the obviously problematic use of the term ‘might’ in this context, this answer defies logic given that new or expanded fossil fuel projects lead to increased emissions, and that the business plans of these companies rely upon the failure of the Paris Agreement.
Finance for renewable energy lagging competitors
As if the bank’s thinly veiled excuse for funding expansionary gas projects wasn’t bad enough, another shareholder pointed out that, according to NAB’s most recent investor presentation, Commonwealth Bank had funded less renewable energy than each of its direct competitors; ANZ, NAB and Westpac. CommBank was asked whether it should match or better its competitors’ funding for renewables:
Livingstone’s response includes an observation that “the renewable energy sector has no shortage of access to funds”, an acknowledgement that instead of actively seeking out opportunities to enable and fund additional renewable energy projects, the bank has left it to other financial institutions to do the heavy lifting. It’s also an acknowledgement that renewable energy is clearly commercially competitive and a growth industry, making Livingstone’s theory that gas should be a ‘transition’ to renewables all the more dubious.
Fossil fuel exposures (mostly) on the decline
CommBank’s 2020 annual report shows the bank decreased its exposure to gas and coal, but increased its total committed exposure (TCE) to oil by +7% and to ‘oil distribution and refining’ by +41%. Asked whether CommBank plans to reduce its exposure to oil moving forward, as it has done for gas and coal, the bank confirmed that it does: