ANZ and NAB called upon to reduce exposure to fossil fuels in line with the Paris Agreement’s climate change goals.
Tuesday 15 December 2020
Shareholder resolutions lodged with ANZ and NAB by over 100 shareholders, supported by environmental finance organisation Market Forces, will be voted on at the banks’ annual general meetings tomorrow (ANZ) and Friday (NAB).
The resolutions call for reductions in exposure to the coal, oil and gas sectors, consistent with the goals of the Paris Agreement on climate change.
Earlier this month, the Production Gap Report – from leading research organisations and the UN – found that between 2020 and 2030, global coal, oil, and gas production would have to decline annually by 11%, 4%, and 3%, respectively, to be consistent with the Paris Agreement’s 1.5°C warming goal.
“Five years since publicly supporting the Paris Agreement, Australia’s major banks continue to doggedly undermine that commitment,” said Market Forces Research Coordinator Jack Bertolus.
“While the banks’ policies have evolved, they continue to pour billions of dollars into projects and companies expanding the fossil fuel industry. This is completely incompatible with limiting warming to 1.5°C.”
ANZ lacking commitment
- ANZ’s October carbon policy update resulted in a step forward, as the bank committed to exit direct finance for thermal coal by 2030. However, ANZ also gifted pure play (undiversified) coal companies a further five year window to plan business diversification, despite these companies having shown no interest in shifting away from coal in the five years since the Paris Agreement was signed.
- The October policy also contained no commitments to restrict or reduce funding to oil and gas, as required to achieve the Paris goals.
- ANZ’s oil and gas exposure increased by 8% in the year to 2019, before dipping 12% in 2020 to $17.6 billion. This figure is nearly double the entire reported fossil fuel (coal, oil and gas) exposure of any other big four bank.
- Meanwhile, both NAB and Westpac recently announced they’re reviewing their approach to funding oil and gas.
NAB holds on to coal
- In November 2020 NAB told shareholders it “expects” to exit thermal coal mining by 2030 but remains committed to exit the sector by 2035, five years too late to be considered compatible with the Paris Climate Agreement. Indeed, earlier this year ANZ dropped out of the lending syndicate for pure play (undiversified) coal miner Whitehaven Coal while NAB chose to remain, despite Whitehaven justifying its expansion plans with coal demand projections consistent with 4ºC of global warming.
- NAB’s reported exposure to gas-fired power increased 117% to $940 million in the year to September 2019 and a further 4% to $980 million in September 2020, the highest of the big four banks. NAB’s reported exposure to oil and gas extraction increased 10% in the year to September 2019 and declined 27% in the year to September 2020. However, NAB attributed the decline to accounting factors(1) and has not yet clarified what the underlying change was, net of these effects.
- In November, the big four banks including NAB and ANZ joined a US$750 million loan to Santos,(2) whose highly opposed Narrabri Gas Project should be blocked on climate grounds according to the former chief scientist.
Over the last year, both banks have continued lending to projects that expand the scale of the fossil fuel industry, such as expansion of the Tipton West gas processing facility in Queensland, a new oil refinery in Malaysia and a new gas pipeline in Canada.
“Seven days after calling for a green recovery in May, NAB funded a new gas pipeline in Canada that, over its lifetime, would enable the release of more CO2 than Australia’s national emissions in 2019,” said Mr. Bertolus.
Meanwhile, the world is changing
The resolutions follow dire warnings by the Reserve Bank of Australia that climate change is already exposing financial institutions to significant financial risk and could jeopardise the stability of the financial system as a whole. The Australian Prudential Regulation Authority announced in February it will undertake a ‘climate change financial risk vulnerability assessment’ of the major banks in 2021.
Commonwealth Bank and Westpac were spared similar resolutions. For Commonwealth Bank, this allows room for an ongoing shareholder process to be resolved regarding adherence to its climate policy, while the effect of Westpac’s May position statement is being closely monitored.
Similar resolutions were lodged last year with ANZ, NAB and Westpac, garnering votes in favour of 14.9%, 12.9% and 16.6% respectively. The current resolutions give investors an important opportunity to set their expectations as NAB intends to review its oil & gas policy by September 2021.
The resolutions and supporting statements can be found here: ANZ, NAB
The investor briefing for the resolutions can be found here
(1) “AUD currency appreciation of USD denominated exposures and lower mark-to-market position of treasury related products” (2020 full year results presentation, p.44)
(2) ‘(AUS) Australia: Santos lifts bridge takeout to US$750m’, Refinitiv Loan Pricing Corp (RLPC) News, 23 October 2020