29 July 2021
Major Australian financial institution Macquarie was today challenged by shareholders and communities over its support for the oil and gas industry, and inconsistencies between this support and its commitment to net zero emissions by 2050.
Just weeks after Macquarie’s commitment to “aligning our financing activity with the global goal of net zero emissions by 2050”, the International Energy Agency (IEA) found that achieving net zero by 2050 means “no new coal mines or mine extensions”, “no new oil and gas fields” and “huge declines in the use of coal, oil and gas”.
Despite these findings, Macquarie remains as a prospective lender to new oil and gas fields, including Karoon Energy’s new 10,000-barrel-a-day oil project off the coast of Brazil (the Patola project) and the West Erregulla gas drilling project in Western Australia being pursued by Strike Energy and Warrego Energy.
In fact, Macquarie already loaned $28 million to Strike Energy for “pre-development expenditure” on the West Erregulla project, and could provide further funding once Strike and Warrego make a ‘final investment decision’.
Given that the Patola and West Erregulla projects appear inconsistent with the IEA’s net zero scenario conclusions, a shareholder asked whether Macquarie will rule out any further funding for these projects, or other projects that are incompatible with the IEA’s findings.
Macquarie’s CEO Shemara Wikramanayake failed to rule out further funding for the projects, instead indicating that Macquarie would only adopt a methodology to align its activities with net zero by 2022.
Despite having committed months ago to “aligning our financing activity with…net zero emissions by 2050”, when asked how Macquarie determines whether finance is compatible with net zero, its CEO told shareholders it may take *until the end of 2022* to figure that out. pic.twitter.com/6vQQ1d0I9F— Market Forces (@market_forces) July 29, 2021
Out of step with top legal opinion?
This appears out of step with a legal opinion published earlier this year by barristers Noel Hutley (SC) and Sebastian Hartford Davis, who opined that “companies wishing to commit to net zero must have a reasonable basis now for believing that they can achieve that commitment” (emphasis added), and that “it is foreseeable that a company (and its directors) could be found to have engaged in misleading or deceptive conduct by not having had reasonable grounds” for the commitments.
In light of this legal opinion, and Macquarie’s involvement in oil and gas projects incompatible with achieving net zero by 2050, a shareholder asked what steps Macquarie is taking to ensure its financing activity (e.g. loans, investments) don’t contravene its net zero commitment.
Astonishingly, Ms Wikramanayake replied simply that’s something Macquarie plans to do by 2022 and that it’s currently evaluating methodologies to do that.
Pressure over connections to Adani coal project
Just like last year’s AGM, this year’s also saw Macquarie questioned about its multiple ties to the Adani Carmichael coal project. Research by Market Forces shows Macquarie still has shareholdings in Marsh McLennan, Adani’s insurance broker, and Stifel, one of the few banks left willing to raise debt for Adani’s NQXT (formerly Abbot Point) coal port in the Great Barrier Reef World Heritage area.
When asked if Macquarie will remain invested in those companies despite the bank’s recent coal exposure and net zero commitment, Chairman Peter Warne said Macquarie is not involved in Adani Carmichael Coal Project “at all”, though did confirm Macquarie owns Marsh and Stifel. While Mr Warne said Macquarie has significantly sold down its stake in Marsh, it wasn’t clear whether it has completely sold its stake. Data from Refinitiv Eikon shows Macquarie had $17 million invested in Marsh McLennan as of March 2021.
Disappointingly, Mr Warne failed to say whether it had engaged with either company regarding their links—or potential links—to Adani, let alone whether any engagement had been successful. He also failed to commit Macquarie to divesting Stifel despite its failure to rule out raising debt for Adani.
Oil and gas business
Leaving aside the $600 million of disclosed oil and gas exposure on its books as of March 2021, Macquarie’s latest annual report shows its most profitable business segment is ‘Commodities and Global Markets’ (CGM), which the company officially describes as “provid[ing] an integrated, end-to-end offering across global markets including equities, fixed income, foreign exchange, commodities and technology, media and telecoms, as well as providing clients with risk and capital solutions across physical and financial markets”.
Given this complex and vague description, you’d be forgiven for not realising Macquarie’s most profitable business segment has its “operations rooted in the oil and gas industry”. Indeed, Macquarie’s annual report boasts the company is the “No. 2 physical gas marketer in North America” and was awarded “Oil and Products House of the Year”, while also referencing the performance of its “North American Gas and Power” and “EMEA Gas and Power” business lines.
In light of its reliance on the oil and gas industry, and the significant declines in oil and gas production required to limit warming to 1.5°C, Macquarie was asked how such declines would impact the profitability of its CGM business.
While Macquarie’s CFO Alex Harvey acknowledged that oil and gas comprises a significant portion of Macquarie’s operations, he failed to reference quantification of the declines in profitability that can be expected should oil and gas production decline consistent with the 1.5°C scenario. Mr Harvey also failed to articulate whether and how this consideration has been incorporated into Macquarie’s climate-related reporting. Far from elaborating on how Macquarie intends to move away from oil & gas in line with the Paris Agreement, Mr Harvey said there will continue to be a “high degree of dependence on gas”.
Macquarie is told to respect First Nations communities
Macquarie came under scrutiny for the third year in a row over its involvement in the Rio Grande LNG export terminal proposed in South Texas. The Rio Grande project is one of three giant LNG terminals proposed to be built in the Rio Grande Valley in South Texas. If built, this LNG project would also bulldoze native wildlife habitats, threaten sacred Indigenous historical sites of the Carrizo Comecrudo Tribe of Texas, hurt the local ecotourism economy, release toxic air pollution and contribute to the threat of climate change.
Rebekah Hinojosa from the Rio Grande area made it clear that community members would do anything they can to stop LNG in their community, asking:
“Today we have delivered over 11,000 petition signatures from the US, our Australian allies have delivered 20,000 petition signatures urging Macquarie to immediately consult with the Carrizo Comecrudo Tribe of Texas the Australian First Nations and immediately withdraw from Rio Grande LNG and Fracking in Australia. Why is Macquarie bank continuing to advise Rio Grande LNG project and finance fracking in Australia when there is clearly tremendous opposition?”
Shamefully, Chair Peter Warne took minimal responsibility for Macquarie’s role in enabling the project, arguing Macquarie’s advisory role means it has “limited influence” on whether the project would proceed. Given Mr Warne was so quick to downplay the company’s involvement, it’s entirely unclear why the decision was made to become and remain involved in this community- and climate-wrecking gas project.
Macquarie also came under fire for having a 5.9% shareholding in Empire Energy, a company that has a permit to frack in the Northern Territory. Traditional Owners from the Northern Territory have been saying no to fracking for over a decade.
Nick Fitzpatrick, a Yanyuwa and Garrawa man from Borroloola in the Northern Territory asked ‘Why does Macquarie Bank think that it’s okay to risk the water of remote Aboriginal communities and the entire water system by investing in a company such as Empire Energy?’
As part of her response, CEO Shermara Wikramanayake insisted Macquarie was consulting with Traditional Owners. This was disputed by Amelia Telford from Seed Indigenous Youth Climate Network who stated that in a Senate Committee hearing held yesterday on the subject of ‘oil and gas exploration and production in the Beetaloo Basin’, Gudanji Traditional Owner Rikki Dank confirmed Empire Energy had not sought proper consent to frack on her land. Telford asked Macquarie to make a commitment to investigate these discrepancies, noting that this could cause ‘significant reputational and financial risk to the company’.
Wikramanayake agreed to look into the discrepancies.