4 May, 2020
Westpac’s Climate Change Action Plan Update, released today, is another nail in the coffin for thermal coal, while the seriousness of the bank's broader commitment to lend in line with the Paris Agreement climate goals will be revealed in time via its oil and gas lending.
Westpac joins the growing list of institutions exiting thermal coal by 2030
Westpac, with $370 million in exposure to coal-burning power as at 30 Sep 2019, the biggest of the four major banks, today committed to exit thermal coal by 2030. The bank has also set an emissions-intensity target for its power generation lending, falling to 0.18 tonnes of CO2 per Megawatt-hour generated by 2030, effectively squeezing out new coal-burning power stations while making it almost impossible to finance new gas-fired power plants.
Westpac follows the Commonwealth Bank in setting this 2030 exit date. Additionally, all three of Australia's big general insurers (QBE, Suncorp, IAG) will be refusing to insure thermal coal by then. This means anyone trying to operate a coal mine or power station in Australia beyond 2029 will find it increasingly difficult to access both debt and insurance.
Westpac will also refuse to take on any new thermal coal customers or mines, with "thermal coal customers" defined as a company generating more than 25% of revenues from thermal coal and a thermal coal mine defined as one generating more than 35% thermal coal by volume.
These commitments build on Westpac's existing policies, introduced in 2017, to refuse to lend to thermal coal mines in new thermal coal basins or with a calorific content of less than 6,300 kcal/kg, to reduce the emissions intensity of its power generation portfolio and to only finance new power stations if they decrease the emissions intensity of the grid in which they operate.
However, loopholes remain. Westpac could still lend to new thermal coal mines (until 2029) and fossil fuel power stations if they happen to slip through the cracks in the criteria mentioned above.
Westpac committed to Paris Agreement goals in theory
On paper the bank has also made an indirect commitment to not finance any new oil and gas projects, indicating that any financing of the sector from this point on will need to be in line with Westpac's commitment to the Paris Agreement. To meet the Paris climate goal of limiting global warming to 1.5ºC, energy from gas must fall by 25% and oil by 37% by 2030 from a 2010 baseline according to the Intergovernmental Panel on Climate Change (IPCC). This rules out any expansion of oil and gas production or use and according to a Global Witness assessment would require 9% of oil and 6% of gas production forecast from existing fields to be left in the ground.
That means that if Westpac is to stick to its climate commitment, it must reverse a disturbing trend in its recent lending activity. Since 2016, just after it first pledged to uphold the Paris climate goals, Westpac has loaned $5.4 billion to coal, oil and gas projects including $846 million to projects that expand the scale of the fossil fuel industry. Over that time frame Westpac has loaned 2.7 times as much money to fossil fuels as to renewable energy.
Westpac must go further
Market Forces is now calling on Westpac to apply the same principles to corporate customers as it has done to projects. In recent years, Westpac’s corporate lending has included deals such as:
- $110 million to Woodside Energy in the 2nd half of 2019 helping that company with its plans to massively expand dirty gas extraction off the coast of Western Australia. The bank earned $2.8 million in fees for arranging this loan.
- $315 million to Origin Energy, which plans to open up the Northern Territory to dangerous fracking.
- $92 million to Whitehaven coal and $54 million to Santos, both of which have plans to expand the coal and gas sectors (respectively).
- $32 million to Horizon Oil, the company embroiled in a corruption scandal after allegedly giving $15.4 million to a shell company owned by the Papua New Guinea Minister for Petroleum and Energy.
Renewables lending unclear
Westpac's climate plan update contains a spending commitment of $3.5 billion in next 3 years and $15 billion by 2030 for "climate solutions". The definition of "climate solutions" is very broad, and includes a large number of activities such as energy efficiency, climate change adaptation for infrastructure, carbon farming and land rehabilitation, renewable energy and any lending to customers that "undertake activities that are over and above what is considered to be business as usual in the relevant industry, and which produce a material net benefit to the environment".
This bundling of a wide array of businesses and activities into one basket means there is very little transparency in how exactly Westpac will spend this relatively small amount of money and how solutions will be prioritised, if at all. Of the big four banks, Westpac has consistently loaned the least or second least to renewable energy each year since 2016. If Westpac really wants to be part of the solution to the climate crisis, then it will need to do more and build on the steps it has taken so far.
Take action: Congratulate Westpac for taking some positive steps, and ask it to ensure its commitment to the Paris Agreement is more than just words.