ANZ and NAB called upon to reduce exposure to fossil fuels in line with the Paris Agreement’s climate change goals.
Thursday 1 October 2020
Environmental finance organisation Market Forces is today lodging shareholder resolutions with ANZ and NAB. The resolutions call for a reduction in exposure to the fossil fuel sector, consistent with the goals of the Paris Agreement on climate change.
Exposure to fossil fuels has been on the rise at both banks in recent years.
ANZ’s exposure to coal mining increased by 27% to $1.4 billion in 2018 and a further 7% to $1.5 billion in 2019, while oil & gas exposure increased 8% to $19.9 billion in 2019.
NAB’s reported net exposure to gas-fired power increased 106% to $1.17 billion in March 2020, while reported net exposure to oil and gas extraction increased 9.5% to $4.14 billion over the same timeframe.
“Nearly five years since publicly supporting the Paris Agreement, Australia’s major banks continue undermining that commitment through their financing activity,” said Market Forces Research Coordinator Jack Bertolus.
“They’ve continued lending to new fossil fuel projects that are entirely inconsistent with limiting global warming to 1.5°C, and banking companies whose business plans rely on the failure of the Paris Agreement.”
“Continued large scale lending to fossil fuels is not only exposing these banks and their shareholders to increasing levels of climate risk, it’s also undermining our chances of keeping the climate crisis under control.”
“These resolutions make crystal clear to ANZ and NAB what’s expected of their planned fossil fuel policy updates.”
The resolutions follow dire warnings by the Reserve Bank of Australia that climate change is already exposing financial institutions to significant climate 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 ANZ plans to announce a new fossil fuel policy in late October, while NAB intends to review its oil & gas policy over the next 6-12 months.
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.
Both banks continue lending to companies whose strategies depend on the failure of the Paris Agreement, such as Whitehaven Coal (NAB), which justifies its expansion plans with coal demand projections consistent with 4ºC of global warming, and Santos (ANZ), whose capital expenditure plans have been found by independent financial think tank Carbon Tracker to be incompatible with a Paris-aligned warming outcome.
Market Forces is also critical of the banks’ performance when it comes to climate risk management. The Task Force on Climate-related Financial Disclosures, which released its final recommendations in June 2017 with a particular focus on the financial sector, set the clear recommendation that banks “should describe their key climate-related targets… in line with anticipated regulatory requirements or market constraints or other goals”.
Unlike competitors Commonwealth Bank and Westpac, neither ANZ nor NAB have disclosed Paris-aligned thermal coal exposure reduction targets. No major bank has disclosed such targets for oil & gas, unlike major Australian insurer Suncorp which announced in August it will phase out underwriting for the sector by 2025 and direct investment by 2040.
The resolutions follow other shareholder proposals calling on pure play (undiversified) coal, oil and gas producers Whitehaven Coal, New Hope Group, Beach Energy, and Cooper Energy to demonstrate how they will ‘wind up’ their fossil fuel production operations, protecting investors’ money from being wasted on stranded assets, and supporting workers as the economy rapidly moves on from fossil fuels to meet the Paris Agreement.
The resolutions and supporting statements can be found here: