Westpac’s new climate plan betrays scientific reality

Westpac undermines the purpose of a climate transition plan

The fundamental purpose of a climate transition plan (CTP) policy is to end support for fossil fuel companies that aren’t on a pathway compatible with a safe climate. The IPCC has concluded that new and expanded fossil fuel projects are incompatible with the goals of the Paris Agreement. Therefore, any company expanding fossil fuels should be ineligible for funding from Westpac from October 2025. It’s that simple.

What a proper CTP review should look like

When a bank is assessing whether or not a fossil fuel company has a credible transition plan, they should be laser focused on two things:

• The company cannot be developing new or expanded coal, oil and gas projects or enabling them by providing new critical infrastructure like pipelines.
• The company must have a genuine plan to wind-down existing fossil fuel production and reduce emissions from existing operations.

These must be red lines. If a company falls at the first hurdle – that’s it, they are ineligible for funding. If a company can satisfy both of these basic expectations, the bank can then support that client in their transition journey.

What makes Westpac’s latest move so egregious is that it used to have these standards. The new standards are so vague that it makes it easier for a company with expansion plans to keep receiving finance.

By watering down these standards just before they come into force, Westpac has made a mockery of the entire point of requiring transition plans: to stop contributing to runaway climate change.

Read on for more detailed analysis of Westpac’s policy changes.

Optics at the expense of substance

The policy update comes in response to major shareholder backlash over Westpac’s inadequate climate policies and continued financial support for companies expanding fossil fuels. For two consecutive years the bank has drawn the ire of shareholders with over one fifth of shareholders in 2023, and over one third in 2024, voting in favor of Westpac adopting stronger policies to exclude finance to coal, oil and gas companies that don’t have credible, Paris-aligned transition plans.

Shareholders have been calling for Westpac to:

1. explicitly state that failure to produce a credible, Paris-aligned transition plan would mean ineligibility for new or renewed finance, and
2. require climate transition plans of all fossil fuel clients, including metallurgical coal miners, coal and gas power generators, and infrastructure companies (such as pipeline developers).

Westpac’s new policy does not address either point. Instead, it appears designed to placate shareholders by providing a lot more detail while simultaneously diluting the substance. The move seems more about optics (fending off another embarrassing shareholder revolt) than making genuine progress.

Westpac shareholders voted for a Paris-aligned approach to fossil fuel finance at the bank’s AGM in 2023 and 2024, but that’s not what they’ve gotten. Not even close.

Red line replaced with layers of grey

Westpac’s previous policy stated that a CTP would only be required of upstream oil and gas companies, and not any other sector. While shareholders were wanting to see this requirement extend to all fossil fuel clients (explored further below), the way Westpac defined a credible CTP was at least clear and strong. That is no longer the case.

In its new policy, the bank has replaced the clear requirement for a credible Paris-aligned CTP with a four-tier A-D rating system. Only a rating of D is a guarantee that new finance will be declined. There is no outline for how these ratings will be determined by the bank.

Previous expectation	New rating system
1.5°C-aligned transition plan covering scope 1, 2 and 3 by 30 September 2025	A – Accept
	B – Accept
	C – Escalate to a ‘governance committee’ – possible decline
	D – Decline

The bar has now been lowered.

Previously, oil and gas producers were to have a 1.5°C-aligned transition plan based on the best available science by October 2025. All emissions were to be covered, including the most crucial Scope 3 emissions: those from the oil and gas these companies sell. Scope 3 emissions typically account for 90% of emissions from the oil and gas production sector.

Westpac’s former policy, which has been in place since November 2022.
“We will continue to provide corporate lending where the customer has a credible transition plan in place by 2025 and will work with our customers to support their development of credible transition plans prior to 2025”	“A credible transition plan should be developed by reference to the best available science and should include Scope 1, 2 and 3 emissions and actions the company will take to achieve greenhouse gas reductions aligned with pathways to net-zero by 2050, or sooner, consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100.”

Under Westpac’s new policy:

• It’s no longer clear whether oil and gas companies need to reduce their Scope 3 emissions (and associated oil and gas production) in line with the Paris Agreement.
• There is a vague expectation to have a ‘plan to reduce’ emissions from their ‘sold products’ and ‘ambition’ to reach net-zero by 2050.
• It’s not clear how low or high that bar is – would the woefully inadequate ‘carbon capture and storage’ plans of clients like Santos be enough for the bank to sign off on new deals? We simply don’t know.

There is a direct link between Scope 3 emissions and coal, oil and gas production. If a company is growing fossil fuel production, its Scope 3 emissions will be going up.
In essence, the new policy makes it possible for Westpac to overlook a company’s expansion plans and continue supporting companies objectively not on a Paris-aligned pathway.

Disingenuously expands CTP expectations to other sectors

A new addition to the policy was a requirement for metallurgical coal miners and coal-fired power generators to have a CTP, but this appears to be cosmetic at best. BHP, one of its biggest metallurgical coal clients, with three potential coal mine expansions on the horizon, is likely to fall outside of the revenue threshold Westpac has set to be ‘in-scope’. Again, no reason or rationale has been provided by Westpac for why the revenue threshold was set where it was.

Westpac also failed to require CTPs from midstream oil and gas companies, despite its client APA Group, Australia’s largest gas pipeline operator, planning to construct several pipelines to support extensive fracking in the Beetaloo Basin, one of the biggest proposed gas projects in Australia’s history.

No justification has been provided for why these companies are considered ‘out-of-scope’ for and exempted from needing a clear, Paris-aligned emissions reduction plan.

Westpac will point to these new CTP expectations and say it has listened to shareholders, but again, it has prioritised optics over substance.

Westpac was always reluctant to hold its climate-wrecking clients accountable

While this massive policy walk-back has come out of the blue, Westpac has been backing away from its commitments on climate for some time.

Westpac has previously disclosed how difficult its oil and gas customers were finding it to demonstrate that they were compatible with a safe climate.

“Through our engagement we deepened our understanding of how challenging it will be for the sector to establish 1.5°C-aligned transition plans covering scope 1, 2 and 3 by 30 September 2025.”

• Westpac’s 2023 Climate Report on the oil and gas sector.

That’s unsurprising given some of their biggest clients have plans to enormously increase oil and gas production.

At its 2024 AGM, Westpac’s chair was unable to categorically state that a company who failed to produce a credible CTP would then be ineligible for finance, saying – “it depends on the relationship we have with that client”.

Policy fails the science test

Westpac’s policy is not in response to the scientific reality we currently face, which is:

• climate change is accelerating at a “perilous” rate,
• there is no room for any new and expanded fossil fuels in an increasingly strained carbon budget, and
• fossil fuel companies are failing to transition, with most continuing to expand their operations.

Westpac (like all financial institutions) must be using transition plans to ensure they are directing their substantial financial resources to companies and initiatives that genuinely align with the transition to net zero and not those contributing to avoid catastrophic levels of warming.

Rather than stay true to their climate commitments in line with the science, Westpac has capitulated to a pathway that simply accommodates its climate-wrecking clients.

Crucial Woodside refinancing decision looms

Westpac’s next test is a crucial financing decision for one of its biggest oil and gas clients, Woodside Energy. According to financial sources, a $1.76 billion loan for Woodside is up for refinancing in July, with Westpac contributing $126 million to the deal that closed back in 2022.

Woodside has been on a tear since then – sanctioning a new oil project in the Gulf of Mexico, an enormous new LNG project in Louisiana, and most recently has had one of its most polluting proposals in the North-West Shelf extension approved by the Federal government until 2070. Choosing to back Woodside again would be an indictment on Westpac’s entire approach to climate change.

Woodside has closed bonds and loans since 2022 but Westpac has stayed out of them, a possible sign of the bank having second thoughts about its relationship with one of Australia’s biggest climate-wreckers. July is an opportunity for Westpac to confirm it’s serious about fossil fuel clients transitioning and send a clear, strong signal to the industry just like Commonwealth Bank did in 2024 when it refused to refinance Santos.

Even with the vague criteria and the discretionary rating system that Westpac uses, it’s nigh impossible to see how the bank could retain any credibility on climate if it keeps financing Santos and Woodside given they have no plans or ambition to reach net-zero by 2050.

If Westpac pulls the trigger on this loan, any credibility it may have had on climate will be shot.