Following significant pressure from Market Forces, customers, staff and shareholders, NAB has released an update on how it plans to ensure the fossil fuel companies it funds are aligned with the Paris Agreement.
The bank signalled its intention to require a climate transition plan from its major fossil fuel customers (metallurgical coal, oil and gas, and coal power sectors from 1 October 2025) and has stated the plan should be “aligned with well below 2°C, pursuing efforts for 1.5°C”.
NAB’s assessment framework will see it considering its fossil fuel clients emissions reductions targets (including Scope 3), reliance on offsets for its targets, what the company is investing in (expansion or renewables), and the links between emissions reductions targets and remuneration. This final point is particularly interesting given that some major fossil fuel companies, like Santos and Woodside, actually incentivise the growth of their oil and gas business through remuneration packages.
NAB also signalled its intention to only arrange bonds for fossil fuel companies with a Paris-aligned transition plan. Bonds are an increasingly critical source of funding for fossil fuel companies. A recent report, Banking on Climate Chaos, found that bonds made up over 39% of banks’ fossil fuel finance in 2023. NAB itself arranged over $1 billion in bonds to fossil fuel companies and projects between 2021-2022.
This latest development leaves climate laggard ANZ even further behind the pack as the only big four Australian bank without a transition plan requirement for fossil fuel bonds.
While NAB’s update is welcome progress, it still falls short of alignment with the bank’s climate commitments. NAB has stepped out its ‘expected approach’ for assessing its fossil fuel clients’ transition plans, which still lacks any concrete commitment to cut ties with companies not aligned with the Paris goals.
While its ‘intention’ is to require transition plans before providing lending or arranging bonds, it will still only ‘consider’ a ‘reduction in exposure’ where companies fail to meet expectations. It seems that NAB might still only be willing to commit to providing less money to climate wreckers, rather than divesting.
NAB’s framework also doesn’t apply to all of its fossil fuel clients, including those involved in midstream and downstream activities that enable fossil fuel expansion. One of NAB’s clients omitted from this policy requirement is APA Group, a gas pipeline company involved in unlocking fossil gas fracking in the Beetaloo Basin.
NAB must require transition plans of all of its fossil fuel clients, including companies who provide the infrastructure required to unlock new coal mines, and oil and gas fields.
At its AGM last December, a massive 28.3% of NAB’s shareholders, representing nearly $27 billion, voted in favour of a Market Forces climate shareholder resolution, demanding the bank close the policy gaps enabling it to finance companies recklessly expanding coal, oil and gas.
NAB has no doubt been anxious to show its disaffected shareholders that it’s been making progress on climate since then. Six months on from the vote and the bank has taken a decent first step, with plenty more to be done. NAB’s shareholders, customers and staff will be wanting to see more improvements with the bank’s full year results and climate updates in November.