Australian banks review exposure to fossil fuels

The big four banks are reviewing their exposure to fossil fuels and considering new lending practises for mortgages and agriculture because of climate change impacts.


But some are leaving the door open to support next-generation coal-fired power.

The banks have provided written answers to questions put to them on climate policy by parliament’s economics committee.

While all four are committed to acting on climate change, some are keener than others to continue backing fossil fuels.

Asked about investing in new fossil fuel projects and coal-fired power, Westpac said it was “not practical” to stop financing certain activities or sectors, despite the bank seeing “climate change risk as a financial risk”.

This may change in the future but now a “balanced approach” was being taken, it said.

“We currently believe that our exposure to climate-related risks is appropriate but we will continue to review and refine our policies as the regulation, technology and science develop.”

Australia’s biggest bank, Commonwealth, said it was working on a detailed climate policy review -based on limiting climate change to two degrees – which would be publicly released.

Its lending exposure to renewable electricity generation was $2.3 billion at December 2016 – five times its exposure to coal-fired power.

Commonwealth’s lending to mining, oil and gas had declined by more than $1 billion to $14.9 billion since June 2016.

“Strict environmental, social and governance standards are incorporated into our business-lending decisions,” the bank said.

National Australia Bank said it assessed applications for finance on a case-by-case basis, taking into account environmental, social and governance risks.

NAB’s exposure at default for the resources sector is $10.5 billion – about one per cent of NAB Group’s total exposure. Of this, only nine per cent related to coal mining.

The bank said it was committed to the transition to a low-carbon economy through its operations and financing, including mortgage, agriculture and infrastructure lending.

ANZ said it would conduct further scenario analysis and “stress testing” to inform its credit risk appetite and lending practises for sectors most exposed to risks of climate change

It also said it was strengthening due diligence processes governing lending to its existing and new coal mining, transportation and power generation.

ANZ said it would fund and facilitate at least $10 billion by 2020 in increased energy efficiency in industry, low emissions transport, green buildings, reforestation, renewable energy and battery storage, carbon capture and storage and climate change adaptation measures.

“We will consider financing new coal-fired power plants if they use advanced technologies and higher quality thermal coal to significantly reduce emissions to at least 0.8t C02/MWh.

“We will not finance any new build of conventional coal-fired power plants.”

Greens MP Adam Bandt said the banks appear to be taking on the climate change message but some were still supportive of coal-fired power.

“The days of dealing with climate change simply by putting a polar bear in your ad are long gone,” he said.