Australian Conservation Foundation survey finds Australian banks lag world on climate and pay

The Paris Agreement and the Glasgow Climate Pact 2021 aims to limit global greenhouse emissions to 2°C with the stretch goal of 1.5°C by 2050.  The Australian Conservation Foundation (ACF) states that the signatories to the Glasgow Climate Pact “understand that achieving the goal implies considerable economic and social transformation”, and that the Australian economy must change on a scale larger than other economies.

The ACF undertook the “first of its kind” research on Australia’s 5 largest banks’ commitments to reaching net zero emissions. The banks included in the study are as follows: Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA), Macquarie Group (Macquarie), National Australia Bank (NAB) and Westpac Banking Group (Westpac). All 5 banks have committed to achieving net zero emissions under the UN-convened Net-Zero Banking Alliance.

The ACF finds that Australian banks are “lagging far behind comparable jurisdictions such as the United States and the European Union”.

To reach these conclusions,  the ACF developed their own scoring metric basing their assessment criteria on key international initiatives and reports, including:

  • The Net-Zero Banking Alliance
  • The Task-Force on Climate-related Financial Disclosures
  • The Science Based Targets initiative, and more.

This criterion was advised upon by relevant experts in the sustainable finance industry. The scoring metrics were split into 4 main categories:

  • Targets
  • Strategy and Action
  • Governance
  • Reporting

Each category has indicators scored on alignment to the statement. A maximum score of 100 would indicate good governance, strategy, and accountability towards the target of net zero emissions. The highest score was CBA at 62.04 and the lowest was ANZ with 34.7.

The report highlights a gap between the policies and practices. The “Strategy and Action” category had the greatest weighting of points, and banks lost the largest proportion of points in this area. The category considered policies and financing for new and expansionary coal, oil and gas projects. Although there are some policies in place to restrict financing to fossil fuel related industries, the policies do not include the main channels of financial support such as general use of proceeds, finance, bonds, and capital markets facilitation.

This highlights the 5 banks’ positions as key players in the national effort towards net-zero. ACF states “banks play a critical role in enabling activities that either worsen or reduce the risks of climate change” and that their role as “facilitators of finance to both the causes of, and solutions to, the climate crisis”.

ACF have released 19 recommendations for all banks to adopt to aid the global goal of net zero emissions. These recommendations aim to align climate change targets to business operations and governance, and transparency of disclosures. Recommendations include but are not limited to:

  • A nominated board member or board committee responsible for climate-related issues.
  • The appointment of board members with specific climate change skills and expertise.
  • A significant portion of executives’ long-term remuneration should be linked to the achievement of climate change metrics.
  • Well-sourced internal capacity and capability to manage climate-related risks.

ACF stresses a lack of “consistency and compatibility” in the metrics and targets assigned to assist in achieving net-zero emissions between the banks. The report also states that there is an “urgent need for banks to accelerate their action on the climate crisis”.

You can read the full report HERE.

© Guerdon Associates 2024
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