Banks’ good intentions risk paving the road to oblivion for service stations

Monday, 17 February 2025

Major banks have been accused of “debanking” service station operators because they sell hydrocarbons.

Lee Marshall is the chief executive of the Motor Trade Association.

OPINION: Even the most well-intentioned ideas have unintended consequences.

We see this happen every day in business, government – even our own lives. Decisions are made that are “directionally correct” – we think they’re right, and either don’t see or ignore any negative side-effects.

That’s why I instinctively cut the Australian banks some slack around their pledges made when signing the Net Zero Banking Alliance (NZBA). It’s a noble intention: banks shouldn’t fund the shale fracking of Fiordland, to give an extreme example.

But directionally correct as it might be, the unforeseen consequences of the NZBA will include driving some businesses into receivership and inflicting financial hardship on their owners and workers.

There are undoubtedly merits to taking a radical, sweeping approach to a problem. But there is no guarantee it will work as you intend. This is a case in point.

Banks are businesses with shareholders, and their shareholders increasingly demand “moral” lending. Fair enough. There may be good money to be made funding tribal war, but best leave that to the someone else.

The mining industry is calling out banks for what it sees as ‘moral judgments’ over climate policies. With NZ First drafting a law to stop industry-based discrimination, the debate over financial ethics and fossil fuels is heating up.

The danger becomes in how far and wide you apply that thinking. The road to hell is paved with good intentions, as they say. And if it’s like the other roads across the country, it’s still being travelled by a fleet that is around 98% fossil-fuel-powered.

Last month, less than 6% of all new vehicle registrations were fully electrified. Even in the UK, which has gone full-send on fleet electrification, that number was just 21%. As in, 79% were not.

With the average vehicle having a 20+ year lifespan, that means we’re in for a long tail of combustion engine vehicles. And what keeps those vehicles moving? Service stations.

Banks have said their policies do not extend to fuel retailers. But that is at direct odds to what station owners are telling us. To quote one, the NZBA is “green-washing in the extreme”.

The Motor Trade Association – which has almost 1000 service station members – has heard many stories from business owners who were denied funding for things such as essential building upgrades. Or just denied outright.

As Waitomo chief executive Simon Parham told Parliament’s finance and expenditure committee last year: “Put bluntly, because we sell hydrocarbons, the major banks are now debanking us.”

This is where intentions and reality decouple. Retailing fuel is a market in decline, not growth. And ironically, many of the investments service stations need funding for are to serve an environmental goal; replacing old tanks, upgrading pump technology, or improving spill containment systems to comply with environmental regulations, to name just a few.

Despite efforts to “decarbonise” the transport fleet, the vast majority of vehicles on New Zealand roads still need fossil fuels to operate.

There is also the practical reality that fuel will be sold, irrespective of whether or not banks finance it. Whether it’s by one foreign-owned fuel company operating a super-site, or two small locally owned businesses (that the NZBA is trying to send into receivership), Kiwis will keep moving.

If the intention of the NZBA, beyond just decarbonising their lending, is to actually decarbonise something (as you would have to hope), then refusing to fund small businesses will fail in its objectives.

Service station owners – many of whom are not giant multi-nationals – not only face the challenge of making a dollar in an industry of tight margins and the risk of crime, they now face the prospect of being unable to sell their business. After all, who would buy a business that cannot be financed?

Federated Farmers, which has done much to put this on the public radar, is calling on the Commerce Commission to investigate the banks’ adherence to the NZBA.

NZ First has also gone to bat to ensure banks can’t pick and choose who to lend to on environmental grounds. Similar moves are underway in Australia and the US.

Will our banks now show similar common sense?

At MTA we support lowering harmful emissions. But applying the NZBA to service stations will have net zero effect on carbon emissions.

It will, however, have a marked net-negative effect on hard-working, lawful businesses, and by extension their customers.

A consequence that is surely as unacceptable as it is unforeseen.