Aussie ethical fund challenges Westpac on climate change for third year running

Wednesday, 9 October 2024

Westpac shareholders are being asked to vote again to force the bank to reveal more about its fossil fuel industry lending strategy.

Westpac is being pressed by Australian activist shareholders to come clean on its transition away from financing fossil fuel extraction, with the activists claiming the bank is “increasingly out of step with international and domestic peers”.

At Westpac’s annual general meeting in December, shareholders will be asked to vote to demand the bank reveal details on whether all fossil fuel companies the bank finances will be required to have “credible transition plans” in place by the end of September next year in order to get loans from the bank.

The resolution from the Australian Ethical super fund manager, which looks after $A10.4 billion for investors seeks to require the banking group, which operates in Australia and New Zealand, to reveal whether it is sticking to its fossil fuel pledge, and how exactly it will judge whether fossil fuel extractors’ transition plans are credible.

In its 2023 sustainability report, the bank said most of its fossil fuel borrowers had provided “reasonable detail” on their transition strategies, and it said initiatives to meet long-term targets often relied on major technological change, or significant capital investment.

It’s the third year the resolution has been put to Westpac shareholders, who last year rejected it, with just 21.59% of Westpac’s shareholders voting in favour of the resolution.

In February this year, Australian Ethical told its investors: “Stopping financing for fossil fuel projects is one of our strategic stewardship initiatives that we’ve been focused on over the last decade.”

Part of its strategy was “to create a bit of a stir” at bank annual meetings, and in each year it has brought resolutions.

However, despite the defeat last year, Australian Ethical said a larger proportion of the two banks’ shareholders have voted in favour.

The background statement to this year’s Westpac resolution said: “Last year, 21.59% of Westpac’s shareholders voted in favour of this resolution, yet Westpac has not provided any further disclosure or amendments to its policy framework to materially address this significant demonstration of shareholder concern.”

It said: “Westpac’s policy settings and fossil fuel finance activity have become increasingly out of step with international and domestic peers over the last year.”

It said in 2023 and 2024, Westpac loans had facilitated fossil fuel expansion that was incompatible with global climate goals the bank claims commitment to.

Australia has a plan to wean itself off coal for generating electricity, and is accelerating the closure of some of its coal-fired power stations.

That included loans to expand liquid natural gas extraction and to the world’s largest gas turbine supplier.

“Westpac loaned $533 million to companies involved in fossil fuel expansion in 2023, almost three times as much as Commonwealth Bank,” the shareholder resolution statement reads.

It said: “Commonwealth Bank’s lending exposure to upstream oil and gas has almost halved in the last two years.”

Commonwealth Bank is the owner of ASB.

The resolution said Westpac had committed to the 1.5°C target of the Paris Agreement and net zero global emissions by 2050, but continued to undermine those goals by financing fossil fuel expansion, which exposed the company to increased climate-related financial, legal, regulatory and reputational risks.

ANZ was ranked by Market Forces as the biggest lender to fossil fuel companies among the big four Australian banks.

Westpac’s 2023 sustainability report said the banking group had $A7.2b of lending to fossil fuel ‘value chains’ including just under $A6b to the oil and gas industry, and the rest to the coal industry, and coal power generation.

The Australian Market Forces environmental advocacy project tracks the big four Australian banks’ fossil fuel exposures.

It reported the big four had reduced their overall lending to fossil fuel industries in 2023.

“In 2023 the big four Australian banks loaned $A3.6b to fossil fuels, the least of any year since 2016 and a little less than half of the 2022 total ($A6.3b). But nearly 70% of this lending went to companies with expansion plans, clearly showing the big banks are still nowhere near aligning with their climate commitments,” it said.

Lending to the coal industry was also down, however banks helped fossil fuel companies raise loans by the issue of bonds, instead of lending to them.

What Market Forces said about the big four banks

Market forces’ report “tried to capture as much information as possible” on banks’ fossil fuel lending, but said “a lack of transparency about fossil fuel finance means that the financing data featured in this report likely only represents a partial picture”.

Here is what it identified in big bank sustainability reporting.

ANZ: Bank reported $A16.4b in fossil fuel exposure in 2023. However, ANZ also reported $A13.5b in exposure to ‘Electric Utilities’ which meant “exposure to fossil fuels is certainly higher than the $A16.4b reported.

Commonwealth Bank: Bank reported $A11.2b of fossil fuel lending, including $A7.9b to oil and gas, and $A1.4b to coal.

Westpac: Total reported exposure of $A8.8b, including $A7.4b for “oil and gas exploration, extraction, refining, terminals, distribution and retail”.

NAB: Reported $A4.98b of fossil fuel exposure, including $A3.04b to oil and gas extraction, and gas-fired power generation, and $A0.45b to thermal coal mining, metallurgical coal mining, and coal-fired power generation.