30 July 2020
Major Australian financial institution Macquarie was today challenged over its involvement in the coal and gas industries, and the risks this poses to shareholders, communities and the environment.
Macquarie claims its “lending exposures to [the coal] sector are limited and we expect them to run off over the next few years.” However, the company is not among the group of over 130 globally significant financial institutions have policies in place to exit the coal sector, which includes 3 of Australia’s big 4 banks.
When asked if Macquarie would commit to providing no further banking or financing activity to the coal sector, and set a date by which existing exposure will fall to zero, Chair Peter Warne was not able provide these commitments, but reiterated the company’s “expectation” that coal exposure will fall to zero “in the next few years.”
Mr Warne was at pains to stress that Macquarie’s coal exposure is small relative to its large loan book. However, Macquarie’s recent climate risk report shows the company has $200 million in lending exposure to the coal sector. Market Forces research has also identified Macquarie as a contributor to a $120 million 2019 loan to help fund New Hope’s coal expansion plans, which are totally inconsistent with the goal of holding warming to 1.5°C.
Without a clear policy commitment to end financial support for this sector and completely exit as soon as possible, the risk of Macquarie helping to finance further coal expansion remains.
.@Macquarie expects its exposure to #coal to "run off in the near term" but won't provide a firm exit date or commitment to no new lending to the sector. So no guarantee we won't see more deals like the 2019 loan to fund @newhopecorp's coal expansion plans https://t.co/LAezu14slC pic.twitter.com/N14AaxNM6y— Market Forces (@market_forces) July 30, 2020
Inconsistent views on the future of gas
Macquarie is a particularly significant player in the global gas sector, so it was no surprise that concerns over the climate, environmental and social impacts of the company’s gas industry exposures were high on shareholders’ agenda at today’s meeting.
Mr Warne’s address to the meeting spoke of “an ongoing role for natural gas for some time.” However, Macquarie’s own climate change scenario analysis shows gas demand falling by around 70% between now and 2050 under each of the 1.5°C scenarios modelled, with a drop of around 20% by 2030 in an orderly transition scenario.
Macquarie was asked if it sees the role for gas declining significantly from now on, in line with the Paris climate targets, and how it will ensure its involvement in the gas industry does not expose the company to avoidable transition risk.
Again, Mr Warne sought to downplay Macquarie’s exposure to the sector. But Market Forces research shows Macquarie has participated in more than 10 project and corporate finance deals for the gas industry since January 2018. The company is also the second largest gas marketer in North America, trading around 13 billion cubic feet of natural gas every day.
Macquarie’s clear exposure to, and interest in prolonging, the gas industry is at odds with its own stated commitment to the Paris climate goals, and its modelling of the transition away from gas required to meet those goals.
Pressure over connections to Adani coal mine
Another issue raised at the AGM was Macquarie’s multiple ties to the Adani Carmichael coal project.
One shareholder expressed his concerns about Macquarie being tied to the project via its stake in Marsh & McLennan, the parent company of Marsh which is currently providing insurance brokerage services for the Adani Carmichael coal project, and the financial and reputational risks this connection entails. When asked if Macquarie would divest from Marsh & McLennan, like Betashares and Australian Ethical investments have done over the same issue, Mr Warne avoided the question, stating the U.S. team is responsible for making decisions on that investment.
Macquarie was also asked to use its power as one of the top three shareholders of Stifel, a bank arranging finance for Adani’s coal port, to deter Stifel from servicing the controversial coal project. The board took the questions on notice, as they were “not aware” of the investment in Stifel. Market Forces research indicates that at 31 March 2020, Macquarie Bank was the third largest shareholder in Stifel. We will be following up with Macquarie to ensure shareholders’ concerns about the company’s connection to Adani are properly addressed.
Adani is desperately trying to find investors to refinance its struggling coal port that will ship Carmichael coal to the world, so Stifel, Marsh and its investor, Macquarie, play a role in opening up funds for Adani to build its destructive coal mine and open up a massive new thermal coal basin.
Macquarie doesn’t seem as concerned as it should be about the reputational risks of holding major stakes in companies providing vital services to the most controversial project in Australia.
Unacceptable community threats posed by Rio Grande LNG project
Macquarie plays an important financial advisory role in the Rio Grande LNG export terminal proposed in South Texas. Community members strongly opposed to the project were represented at today’s AGM, raising concerns that Rio Grande will destroy pristine lands that are sacred to the Carrizo Comecrudo Tribe and pollute the local community with toxic air.
“Macquarie Bank is the private equity investor for the proposed Rio Grande LNG export terminal that would destroy pristine lands that are sacred to the Carrizo Comecrudo Tribe. This project is tremendously opposed by local communities. The NextDecade company has never consulted with our tribe about the Rio Grande LNG project, which would be an environmental disaster for our region. The inadequate consultation is a violation of our rights as the Native Original People of the Rio Grande Valley region of South Texas. What message do you have for our communities who are against the LNG terminal and have not been properly consulted about this project?”Juan Mancias, chairman of the Estok Gna, the Carrizo Comecrudo Tribe of Texas
“Macquarie Bank is the private equity investor for the Rio Grande LNG export terminal proposed for my community. If built, the terminal would pollute our marginalized community with toxic air pollution, hurt our local economy that depends on fishing from our pristine ecosystems, and destroy the endangered ocelot’s habitat. The Rio Grande LNG terminal would liquefy and export fracked gas and drive the expansion of fracking in Texas, which would worsen global climate change. Why is Macquarie supporting the Rio Grande LNG project that is facing massive public opposition and lawsuits when the bank has committed to “supporting the transition” to a low-carbon economy?”Josette Hinojosa from Brownsville, TX in the United States
In response to these two questions, Macquarie sought to downplay its role in the project, and also noted the project had been downsized and delayed. However, Mr Mancias and Ms Hinojosa asked the company to denounce the project, and meet with Carrizo Comecrude and local community representatives to discuss their concerns and Macquarie’s role in the project.