16 December 2022
NAB faces shareholder backlash over continued support for new fossil fuels at 2022 AGM
Today, National Australia Bank (NAB) faced a formal proposal from shareholders asking it to demonstrate how the company’s financing would not be used for the purposes of new or expanded fossil fuel projects. NAB is trying to establish itself as a climate leader in Australia, having produced its inaugural climate report just one month ago, alongside new emissions reductions targets for its financed emissions in the coal, oil and gas sectors.
Yet in 2022, NAB’s lending policies still leave the door wide open for the bank to provide finance to new fossil fuel projects and the companies building them. It’s little surprise then that over the past year NAB has continued to provide finance to companies and projects such as Santos and the Pluto 2 LNG Train.
Last month, a UN High-level Expert Group confirmed what many experts have been saying for years,
“Non-state actors cannot claim to be net zero while continuing to build or invest in new fossil fuel supply.”
NAB has been a prolific financier of the fossil fuel industry since the signing of the Paris Agreement, having poured tens of billions of dollars into the fossil fuel industry since 2016.
NAB has stated its commitment to the Paris Agreement and net-zero by 2050. Yet the bank has continued to fund massive new projects and the companies building them in total contravention of its commitments. NAB knows the costs of climate change but is still refusing to do what is required to stop it, and it’s the community paying the costs. Whether it’s in the form of rising premiums or damaged homes, or in the case of Traditional Owners, the trashing of the principles of Free, Prior and Informed Consent, NAB has failed to stand up as a supposed leader. NAB’s policies and actions are not consistent with limiting warming to 1.5°C, and the Chairman and CEO failed to address these shortcomings in today’s shareholders meeting.
Analysis released in 2021 from Market Forces revealed that between 2016 and 2020, NAB loaned more than $9.5 billion to fossil fuels, including $1.4 billion for expanded coal, oil or gas projects. These projects over their lifetime would enable the release of 3.6 billion tonnes of CO2 (equivalent) into the atmosphere, equal to about 7 times Australia’s total 2020 greenhouse gas emissions.
In May 2021, the IEA concluded that reaching net zero greenhouse gas emissions by 2050 means there should be “no new oil and gas fields approved for development … and no new coal mines or mine extensions are required.” Despite this, since the beginning of 2021 NAB has signed off on at least 31 more fossil fuel deals, including 16 deals for companies and projects that would expand the fossil fuel industry. Since the IEA released net zero by 2050 scenario (NZE), NAB has financed Santos, Cooper Energy, Beach Energy and Viva Energy, and the Pluto 2 LNG project. This project would see an additional 1.37 billion tonnes of CO2 entering the atmosphere.
Meanwhile fossil fuel companies have been attempting to use Russia’s invasion of Ukraine and the resulting energy crisis as justification for developing new fossil fuel projects, but even amidst the crisis the IEA reinforced its original finding in its October 2022 World Energy Outlook (WEO) by stating:
“No one should imagine that Russia’s invasion can justify a wave of new oil and gas infrastructure in a world that wants to reach net zero emissions by 2050.”
International Energy Agency, World Energy Outlook, October 2022
NAB’s current policies allow the bank to still directly finance new LNG projects and provide corporate finance to companies developing new coal mines and oil and gas fields. NAB’s current policy settings only require clients to have transition plans in place by 2025, giving their highest emitting clients three more years to lock in new fossil fuel projects that could be operating for decades to come.
For these reasons, Market Forces coordinated a shareholder resolution put to today’s meeting, calling on the bank to live up to its net-zero by 2050 commitment and stop funding new fossil fuel projects and the companies pursuing them. Market Forces Campaigner Michelle Surowiec gave a speech in support of the resolution at today’s meeting. Watch the speech below.
Investors managing or owning 6.7% of NAB’s shares – representing over $6.5 billion of investment – supported the resolution, signalling discontent amongst some of the bank’s shareholders over its inadequate approach to climate change.
However, this also suggests many investors failed to live up to their own climate commitments. Any investor claiming to commit to net zero by 2050 must realise this means no expansion of the fossil fuel industry, and therefore, back calls for that outcome. Unfortunately, many super funds would have used their members’ money to block this critical climate action.
Disregard for Traditional Owners and Free, Prior and Informed Consent
Free, Prior and Informed Consent (FPIC) is a principle protected by international human rights standards that state, ‘all peoples have the right to self-determination.’ According to NAB’s ‘Human Rights Policy’, “The Group will seek to avoid knowingly providing financial products and services to companies where the Group considers there is credible evidence of material violations of land rights or improper land acquisition”, it defines best practice in the case of Indigenous peoples as embodying ‘Free, Prior and Informed Consent’.
One of NAB’s most concerning recent deals is the bank’s co-arrangement of a $1 billion loan to Santos in August 2022. Santos is currently pursuing multiple new oil and gas projects including the Narrabri gas project, the Pikka oil project, and the Barossa gas project.
Santos has been making recent headlines for its hugely controversial Barossa project, located in the waters north of the Tiwi Islands in the Northern Territory. In September 2022, Tiwi Islands traditional owners won a federal court challenge against Santos’ project. The court ruled that Santos had failed to adequately consult Tiwi Islands traditional owners about the project. Santos challenged the ruling, but its appeal was rejected by the Federal Court in December. Despite the ruling and the Munupi people of the Tiwi Islands declaring “Munupi people don’t want any fossil fuel activities off the coast line of the Tiwi Islands”, Santos remains adamant that first gas will be achieved from Barossa in the first half of 2025.
Market Forces Executive Direct Julien Vincent challenged the board on whether NAB’s policy was applied when considering this loan to Santos. Watch the exchange below.
Mr. Chronican said “I can tell you that our policy was followed” and “we have policies that are followed and fall over all the time,” but couldn’t explain why the bank did not hold off on loaning until the court had decided the case.
NAB’s funding for climate- and community-destroying companies
Despite its commitments to the Paris Agreement and net zero by 2050, and in the knowledge that achieving these goals leaves no room for new fossil fuel projects, NAB has continued pouring money into companies and projects that are commensurate with blowing past 1.5°C of warming.
NAB’s attempts to demonstrate climate leadership through its climate reports, policies and emissions reductions targets are little more than greenwashing when considering that NAB continues to not restrict finance to companies building new fossil fuel projects in 2022. CEO Ross McEwan was recently presented with a Greenwash Award for NAB’s efforts. NAB’s own climate report acknowledges that a key assumption underpinning the IEA’s NZE scenario, which it uses as its reference for target setting, rules out any new coal, oil and gas projects. NAB proudly touts that it has not provided direct finance for new thermal coal mines since 2015, whilst still providing corporate finance to the companies building those mines like Whitehaven Coal.
NAB’s current policies and practices are woefully inadequate to prevent financing of new fossil fuels, and the bank does not even expect its heavy emitting clients to have transition plans until October 2025.
Corporate finance – NAB’s massive loophole for new coal, oil and gas
A recent report from Global Energy Monitor found that direct ‘project finance’ makes up around 20% of funding for new coal projects, the other 80% is attributed to general ‘corporate finance’ loans. NAB’s current policy only rules out project finance to new coal projects, but not corporate finance to the companies building them, a glaringly obvious loophole given these statistics.
In February 2020, NAB lent $110 million to Whitehaven Coal in a loan worth $1 billion. Crucially, that loan is due to be refinanced in July 2023, and NAB has yet to publicly rule out providing any additional finance to Whitehaven. The CEO of Whitehaven, Paul Flynn, told shareholders at Whitehaven’s AGM that the company is in discussions with its lending syndicate and thinks the loan will be refinanced. That NAB hasn’t ruled this out is deeply concerning for a bank hoping to be taken seriously on climate change.
Whitehaven is the biggest ASX-listed undiversified thermal coal mining company. The company has three proposed new coal mines in the pipeline – Vickery, Winchester South, and Narrabri Stage 3. These projects would produce a whopping estimated 1.14 billion tonnes of CO2 over their lifetimes.
NAB also contributed to a $1 billion to Santos in August, a company that wants to increase oil and gas production by at least 17% by 2030.
Amanda Richman of Australian Ethical Investment questioned why NAB is foregoing the opportunity to be a climate leader by ruling out corporate finance facilities to fossil fuel expanders. Watch the exchange below.
Mr. Chronican’s answer failed to actually address the question about corporate finance. When asked to address the obvious corporate finance loophole, Mr. Chronican simply replied, “you call it a loophole, but we have a plan.” It seems the plan is for the loophole to stay open.
Later in the meeting, when responding to a question about climate risks from a Victorian farmer, Mr. Chronican actually articulated the issue well. The Chairman said “the criticism is that we are financing companies or have banking facilities in some cases, where those companies are looking at the expansion.” It wasn’t clarified how NAB reconciles its plan to not expand the fossil fuel industry with its practice of funding companies that do. Watch the exchange below.
Ross McEwan’s Greenwashing
Just a couple of weeks ago, Ross McEwan was presented with a Greenwashing award for NAB’s ongoing finance for coal and gas expanders whilst pretending to be committed to net-zero by 2050.
NAB’s board was questioned about the risk of greenwashing today by Market Forces Campaigner Morgan Pickett.
When the Chairman was asked about greenwashing, he brushed off the question telling Mr. Pickett that the question was substantially the same as previous questions. Yet Mr. Chronican had failed in all previous attempts to substantially address the very real concerns shareholders have around the climate risks inherent in NAB’s continued financing of climate wreckers.