The Australian Conservation Foundation (ACF) has released its latest climate credentials rankings for Australia’s five biggest banks, analysing policy and climate strategy to determine the true impact of the financial sector’s actions.
Each bank is assigned a score out of 100 based on net-zero commitments, emission transition plans, sector-specific targets, climate solutions financing, fossil fuel financing, deforestation policies, emissions disclosures and their direct and indirect engagement with the Paris Agreement.
Westpac was rated number one on its policies, with a score of 61.85 – not exactly a shining example of climate leadership.
NAB (58.1) and Commbank (57.86) were next, followed by ANZ (50.85) and Macquarie bringing up the rear with a score of 50.19.
Oil & gas project policies lacking
All five major banks have committed to the UN’s Net Zero Banking Alliance – none have fully aligned their activities with the Paris Agreement’s targets, however, and the ACF’s research reveals substantial gaps in their strategies.
That said, some banks are certainly performing better than others.
Westpac has emerged as a climate leader by introducing bond restrictions for fossil fuel projects, making it the first Australian bank to address the growing significance of bonds in financing fossil fuel expansion – last year, 38% of fossil fuel financing was in the form of bonds.
The bank also committed to ceasing direct financing for new thermal coal mines and expansions and has introduced a zero-deforestation policy for livestock agriculture, a move applauded by environmental advocates.
Commbank has opted to halt refinancing for clients without Paris-aligned transition plans, setting a clear expectation for companies to align their forward plans with climate science by 2025. Unfortunately, this policy only applies to new clients.
National Australia Bank has completely removed its financial exposure to thermal coal mining, a solid move toward its commitment to finance no new coal mines or expansions. NAB has yet to extend that policy to oil and gas projects.
ANZ has introduced targets for sectors like thermal coal, aviation and shipping but the bank’s transition plan doesn’t account for Scope 3 emissions, leaving a yawning loophole in its climate strategy.
Finally, Macquarie is trailing behind the other big banks.
The investment bank has no policy on oil and gas project financing, and while it has increased investment in green energy projects, Macquarie’s reporting allows the bank to claim undue credit for the total capacity of projects it has only a small stake in.
Bank lending policies in focus
Overall, while the major Australian banks are all moving in the right direction in terms of climate policy, there is still a need for greater transparency.
“There has been progress across the sector but it needs to accelerate rapidly to spur on the decarbonisation of our economy that’s needed to address the climate crisis as Australians face another summer of extreme weather,” ACF corporate campaigner and report co-author Jonathan Moylan said.
“The majority of progress made by banks this year was due to the tightening of lending policies to environmentally harmful industries but bank lending policies remain the area requiring the most action for banks to meet their net-zero commitments.
“It is encouraging to see some movement on tackling deforestation, with Westpac adopting a zero-deforestation policy for livestock agriculture.
“This assessment comes at a pivotal moment in Australia’s decarbonisation journey, with mandatory climate-related financial disclosures due to begin from January 1, 2025.
“While there is encouraging progress, banks cannot rest on their laurels.
“The stakes are too high – for communities, for nature, for the economy – for banks to shirk their responsibility, as Australian corporate citizens and prudent fiduciaries.”