NAB, which has committed to net-zero emissions by 2050 and the goals of the Paris Agreement, today released its inaugural Climate Report and once again failed to commit to ruling out financing companies building new fossil fuel projects.
NAB said it will be “considering selectively reducing exposure to high emitting clients that have been unable to demonstrate how they are aligned with the Group’s sector targets”. By way of reminder, the year is 2022, global warming has already increased 1.2ºC, we are on track to exceed the 1.5ºC global warming limit of the Paris Agreement in the next decade and NAB is now ‘considering’ not banking clients in high-emitting sectors.
Here’s a couple of clients NAB may be considering its relationship with but as of the year 2022 has no problem continuing to finance: Whitehaven Coal and Santos. These companies are planning to spend billions of dollars unlocking billions of tonnes more CO2 emissions. NAB’s policy: they’re going to think about it.
Increase in oil and gas exposure
NAB revealed a 11% increase in FY22 of its overall exposure to fossil fuels, with the increases primarily attributed to oil and gas extraction.
Last year, NAB announced it was capping oil and gas exposure at US $2.4billion. After reporting exposure of US $2.09bn in FY21, this year NAB reported a regression in exposure to US $2.34bn. The increase has NAB finishing the financial year close to a policy breach of its own exposure cap.
NAB cited that the reasons for the increase have been “significantly driven by passive movements in foreign exchange positions across the existing portfolio and is not due to an increase in underlying lending.” That’s all well and good, but as a bank NAB should know about exchange rate fluctuations and be actively working to reduce its actual exposure to the sector and minimise the risk of currency movements blowing out its target.
Remaining committed to supporting new LNG
Disappointingly, NAB has recommitted itself to LNG, stating “NAB will continue to support integrated liquified natural gas (LNG) in Australia, New Zealand, and Papua New Guinea and selected LNG infrastructure in other regions.” NAB lived up to its policy, which is aligned with the failure of the Paris Agreement, earlier this year when it participated in a loan facilitating the Pluto 2 LNG project, which will process gas from Woodside’s climate wrecking Scarborough gas field.
Despite NAB setting an oil and gas financed emissions reduction target of 21% by 2030 (from a 2021 baseline), NAB’s current policy settings and lending practices remain insufficient to curb real-world emissions from projects like Pluto 2.
Missed opportunity to rule out new thermal coal producers
NAB did not update its policy to exclude lending to customers expanding the scale of the thermal coal industry. Despite ruling out providing project finance for new thermal coal projects, providing corporate finance to companies building them remains on the cards under NAB’s policy settings. Globally, corporate finance accounts for nearly 80% of the financial pipeline underpinning new coal production, dwarfing direct project finance.
For example, NAB is still exposed to Whitehaven Coal with a loan due to reach maturity in 2023. Concerningly, at a recent business lunch, NAB CEO Ross McEwan dismissed calls to stop financing fossil fuels as NAB benefits from a commodities boom in which “coal prices are extraordinary.”
This year, a critical shareholder vote will be held, asking NAB to demonstrate how its financing will not enable the expansion of the fossil fuel industry. These results only serve to underscore the need for shareholders, customers and the wider community to hold NAB accountable for the climate impacts of its financing.