Westpac says no more gas funding, with safety warnings

It is understood that Westpac’s new measures affect only a handful of clients and the bank’s total exposure to oil and gas is approximately $2.4 billion. Anthony Miller, Westpac’s head of institutional banking, said all of the bank’s clients were working through how they would achieve net zero emissions, pledging to work with them to achieve the transition.

We have set our own target

“Every client is involved in this, thinking about what their transition plans and targets should be. It will only get deeper and more substantive as we progress,” he said.

“Just like if a client doesn’t meet their financial commitments, we don’t leave them, we don’t leave, we stay with them and help them. It’s just about partnerships, we’ve set our targets, we’ve shared them with clients, and we’ve set our own targets.”

Announcing changes to bank lending policies in power, cement and oil and gas, including a commitment to cut oil and gas emissions by 23 percent at 2021 levels by 2030, Mr King said Westpac would reassess if requested by the government.

“Oil and gas is the main change today, and we have thought about it, but above all if energy security is a risk to the country, we will consider financing new fields,” King said.

“If we need investment for domestic power security, then we will see. If the government requires it, if the regulator requires it, we will look at it.”

Last November, NAB boss Ross McEwan said the bank was not asked to consider new projects and would apply a strict definition around what is in the national interest.

Westpac’s decision to curb lending for greenfield oil and gas expansion follows NAB’s move last year to impose a $2.4 billion cap on financing new projects. Both banks said they would reassess if the government or regulator deems new projects important for domestic energy security.

With this agreement, Australia’s two largest banks have fallen in line with the International Energy Agency, which says no new fossil fuel projects should be built to limit global warming to 1.5 degrees by 2100.

On Wednesday, Westpac became the last major Australian bank to join the international Net Zero Banking Alliance (NZBA), which accounts for about 40 per cent of global banking assets.

ANZ, the first bank to join the NZBA and which leads the top four as a provider of local capital to the resources sector, previously said its emissions may rise in the next few years as new oil and gas projects start operating.

Credible and strong plan

Last year, it set sectoral policies for commercial properties and power plants, but has not yet clarified and oil and gas policies. Mark Whelan, NZ’s head of institutional banking, recently said the conversation developed because of Moscow’s war in Ukraine, with less pressure on banks to get out of fossil fuels quickly.

“Two years ago, we heard a lot [the argument that] You need to get out of all fossil fuels immediately. What we’re hearing now is a much more balanced discussion of these things from regulators and investors in particular, to say this is complicated. It will take time,” said Mr Whelan.

Westpac’s transition plan will help it mobilize capital, with investors demanding not only commitment but also a credible and robust plan to make the transition, King said.

“We need a target, and we need a plan and that plan must mobilize capital. We do need this security plan,” said the CEO.

The NZBA is an industry-led bank coalition representing about 40 per cent of global banking assets that has pledged to achieve net zero emissions by 2050. ANZ, Commonwealth Bank of Australia, National Australia Bank and Macquarie Group are already members.

The Investors Group on Climate Change (IGCC) welcomed Westpac’s commitment, noting that the company should align with credible projections such as the IEA’s net-zero scenario, signaling any move to use national security interests as an “out” to its commitments needs to be made. well justified.

“Investors will take a close look at how strongly the benchmarks are applied, what metrics and exceptions apply,” said Laura Hillis, IGCC’s director of corporate engagement.

“Expanding and expanding the oil and gas sector is inconsistent with a 1.5-degree path, so investors will welcome the bank’s plans to move away from lending to such projects.”

Mr King said releasing “clear markers” for what the bank would finance would help customers make the transition.

“Across Australia, we now have stronger alignment and momentum on climate action across all states, and I am optimistic that great progress will be made with the cooperation of government, industry, business and society,” said King.

The next steel value chain

Westpac will give existing oil and gas customers until 2025 to implement a “credible” transition plan, agree to continue corporate lending and work with customers to implement this plan.

The bank also defines emission intensity for power generation, saying 79 percent of its loans to the sector are directed at renewable energy. Westpac included the cement production industry in its first round target due to the intensity of emissions from the manufacturing process.

“Our targets are designed to allow financing of the sector to continue as the sector shifts to new technologies to reduce carbon dioxide releases in manufacturing processes,” said Westpac.

Westpac said it would publish a full net-zero transition plan within 12 months of setting the target. Miller said the steel value chain is the next consideration.

“Our intention is to progressively release targets as we do the work that needs to be done,” Miller said, listing property, agriculture, transportation, and other components in the manufacturing supply chain as next in line.

“The whole approach is to make sure we’ve done the job. The priority under the NZBA is that you have to focus on the most emissions-intensive industries first,” Miller said.

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