Australia’s big banks reject Nationals’ claims managing climate risk is ‘virtue signalling’

Major banks say Australia’s international trading partners require the sector to identify and disclose climate risk on their balance sheets

Australia’s big banks have declared they need to actively manage climate risk because governments and regulators require it, and because the investor community is “increasingly transitioning its focus towards a net-zero emissions economy”.

The banks and their lobbying arm, the Australian Banking Association (ABA), have used new submissions to a parliamentary inquiry to implicitly rebut claims from senior Nationals that their actions amount to moral posturing or virtue signalling.

The banks and the ABA point out current carbon risk practices – namely, disclosing information relating to climate exposures and calculating the potential risk of climate change on their balance sheets – are requirements driven by international governance setting bodies, of which Australian regulators and Australian companies are members.

The parliamentary inquiry, chaired by the Queensland National George Christensen, was triggered by a public commitment from ANZ to step back from business customers with material thermal coal exposures – market signalling that sparked consternation from the Nationals.

After the ANZ’s statement last October, the agriculture minister David Littleproud called for a boycott of the bank, and the deputy prime minister, Michael McCormack, declared the bank’s plan “virtue signalling”. Christensen has previously denied the link between climate change and the severity of natural disasters.

In the wake of the ANZ fracas, the resources minister and Queensland National Keith Pitt originally instructed the joint standing committee on trade and investment growth to grill financial regulators, the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority, as well as the banks, about their plans to pull back on lending or insuring mining projects because of climate change.

But the inquiry stalled after the joint standing committee – in a rare rebuke – deferred making a decision about whether to proceed with Pitt’s original ministerial referral. The stalling reflected a view among some Liberals that the inquiry should not be a witch-hunt against banks managing carbon risk.

Pitt subsequently broadened the terms of reference, asking the committee to investigate finance for all export industries. He said the adjustment was a strengthening of the original terms of reference.

Some fossil fuel producers and their contractors in Australia have used submissions to the inquiry to argue it is now harder to get finance because major global investors and insurers are actively reducing their exposure to risks from the climate crisis.

But the major banks and the ABA say governments and regulators around the world have identified climate risk as a relevant factor which banks and other sectors must consider, and they argue Australia’s export sector is expanding after the economic shock of the Covid-19 pandemic.

The ABA says governments – particularly the new Biden administration in Washington and Boris Johnson in the United Kingdom – “are actively requiring their trading partners to act on climate risk”.

The National Australia Bank notes in its submission that a number of Australia’s major trading partners “are either planning or considering implementing carbon border adjustment mechanisms to support their emissions reduction targets” and the NAB says “this would have flow on impacts for Australian exporters”.

The ABA also notes that Britain will host the United Nations Climate Change Conference in Glasgow in November, and chancellor Rishi Sunak has announced the UK’s intention “to mandate climate disclosures by large companies and financial institutions”.

Australia’s banking regulator, the Australian Prudential Regulation Authority, also notes in its submission it has stepped up climate risk guidance to financial institutions “since the Australian government became party to the Paris agreement in 2016” – meaning it is responding to policies the government has set.

The ABA has told the committee exporting businesses in Australia face many challenges, but “access to finance is not key among them”. Citing survey data from the Department of Foreign Affairs and Trade, the ABA notes according to that data, “access to finance and the capacity to finance further growth in the business have not made the top ten issues in the past five years”.

The ABA says the banks were a significant “shock absorber” for businesses in Australia hit by the economic downturn triggered by the pandemic, and it says the export sector in Australia is diversifying and “optimistic about the future” now that economic growth is returning to trend.

The bank that inadvertently triggered the parliamentary inquiry, the ANZ, says it is currently providing $14.2bn in support for resources companies globally, and it contends it is “the leading resources bank in Australia”.

“Reflecting our global outlook, we also have the largest presence of the domestic banks in China, Japan and Korea; these are Australia’s major resource trading partners,” the ANZ submission says.

It says its climate change statement in 2020 “explains that we’re supporting our 100 largest emitting customers on their response to climate change, sets out our $50bn funding and facilitation target and details how we’re steadily reducing our financing for thermal coal through to 2030.”

The ANZ says managing this transition is not new. “By 2030, we will have been discussing our thermal coal position with customers for 15 years.”

It also notes the engagement with big emitters “does not apply to small and medium businesses, including in regional or rural areas, or farmers that export or service the domestic market.”


Katharine Murphy Political editor

The GuardianTramp

Related Content

Article image
Australia’s banks likely to reduce lending to regions and sectors at risk of climate change impacts, regulator says
Apra finds country’s banks may be more vulnerable to economic downturns as they face threefold increase in lending losses

Adam Morton Climate and environment editor

30, Nov, 2022 @8:27 AM

Article image
Liberal MPs pour cold water on inquiry backed by Frydenberg into bank lending for coal projects
Andrew Bragg and Tim Wilson say inquiry is unnecessary because it’s a legitimate ‘matter for those institutions’

Paul Karp

16, Dec, 2020 @6:14 AM

Article image
Liberal MPs scorn National’s $250bn plan for taxpayers to underwrite fossil fuels
Keith Pitt’s proposal, which suggests huge loans for resources sector in return for his party backing net zero, left on table by Scott Morrison

Katharine Murphy Political editor

07, Oct, 2021 @7:47 AM

Article image
ANZ to stop lending to Australia's biggest coal port over its exposure to fossil fuels
NAB to step in to help Port of Newcastle refinance under agreement reported to bind it to reducing carbon emissions

Ben Butler and Adam Morton

09, Feb, 2021 @8:15 AM

Article image
Westpac to withdraw support for thermal coalmining after 2030
Bank says climate change is a financial risk and addressing use of fossil fuels will create opportunities

Adam Morton Environment editor with AAP

04, May, 2020 @5:38 AM

Article image
Climate change: three of Australia’s big four banks reviewing exposure to fossil fuels
Commonwealth, NAB and ANZ are each analysing the financial position of business customers in sectors exposed to climate change

Gareth Hutchens

07, Apr, 2017 @8:52 AM

Article image
Warren Entsch rejects Nationals' calls for a banking inquiry
Liberal MP criticises Barry O’Sullivan for saying he feels entitled to agitate, saying a victims’ compensation scheme is a better way to deal with rip-offs

Paul Karp

26, Nov, 2017 @10:29 PM

Article image
Josh Frydenberg to make case for net zero, saying Australia can’t risk being seen as a climate change pariah
Treasurer links stability of domestic financial system to how Australia’s position on climate change is viewed

Katharine Murphy Political editor

23, Sep, 2021 @5:30 PM

Article image
Trillions of dollars at risk because central banks’ climate models not up to scratch
Climate research finds modelling used cannot predict localised extreme weather, leading to poor estimations of risk

Peter Hannam

09, Aug, 2022 @5:30 PM

Article image
Coalition cites ANZ credit card rate cut as proof no royal commission is needed
Malcolm Turnbull welcomes the interest rate cut as evidence the house economics committee is holding banks to account

Gabrielle Chan

19, Feb, 2017 @5:51 AM