MAC: Mines and Communities

Big Four Australian banks slash lending to coal miners

Published by MAC on 2017-08-01
Source: The Age

Are Australian banks listening and acting, when confronted with the overwhelming of coal burning as the biggest single malign contributer to global greenhose gas emissions?

It seems they are.

However, they continue backing oil, gas and LNG as so-called "transition" fuels.

Big four banks slash lending to coal miners

Clancy Yeates

The Age

24 July 2017

Australia's big banks have slammed the brakes on project finance lending to expand the coal industry since late 2015, but are still lending billions for other fossil fuel developments, environmental finance group Market Forces says.

ANZ and Commonwealth Bank, previously named as the largest lenders to fossil fuels, both signalled they were actively reducing loans to some carbon-intensive sectors including the coal industry, with CBA linking this to the Paris climate change agreement in 2015.

The future of energy in Australia

Coal has dominated the National Energy Market, but the closure of Hazelwood power station heralds a potential transition to renewables.

Westpac and National Australia Bank have also toughened their stance on lending to coal mining recently, as all four banks are targeted by environmental groups.

Even so, critics of all four banks maintain much more action is needed in order to meet the climate change targets that banks say they support.

Market Forces conducted a detailed survey of the big four banks' project finance – lending to a specific mine or project, rather than a corporation – since the big four supported the Paris agreement to limit global warming to no more than 2 degrees.

Its analysis, to be released on Monday, did not find a single new project finance loan that went towards expanding coal mining since late 2015. This has partly reflected weak conditions in coal mining, but banks signalled it was also partly because of a toughening in coal lending.

"The big glimmer of hope is for the first time we can see the banks have stopped funding the expansion of the coal industry through project finance," Market Forces executive director Julien Vincent said.

Lending to companies involved in the coal sector also dropped sharply, Mr Vincent said.

Corporate and project finance lending by the big four to coal has more than halved from $3.1 billion in 2015, to $1.4 billion in 2016, and just $99 million in the first half of 2017.

Banks disclose their carbon exposure differently to this, but lenders confirmed they were running down exposure to the coal industry.

A Commonwealth Bank spokesman named many factors that went into a loan decision, but indicated its Paris commitment was one reason for the downturn in coal lending.

Westpac recognises that climate change is an economic issue as well as an environmental issue, and banks have an important role to play in assisting the Australian economy to transition to a net zero emissions economy.

"In keeping with our commitment to the Paris accord, our actual direct exposure to coal mining has declined and our support for gas as a transition fuel, and for renewables, have increased," a spokesman said.

An ANZ spokesman said "active portfolio management" was one reason its lending to the most carbon-intensive industries had fallen 10 per cent in 2016.

The bank's total coal mining exposure is 0.16 per cent of all loans, and has halved from $2.8 billion to $1.4 billion in the last three years, he said.

Westpac chief executive Brian Hartzer referred to the bank's recent policy change to rule out new lending in previously undeveloped coal basins, or for coal with low energy content.

"Westpac recognises that climate change is an economic issue as well as an environmental issue, and banks have an important role to play in assisting the Australian economy to transition to a net zero emissions economy," Mr Hartzer said.

Despite the decline in coal lending, Market Forces found new lending for gas, oil and liquefied natural gas in Australia and overseas was far greater, with more than $17 billion lent to fossil fuel since the Paris commitments. This was more than three times the new lending to renewables, it said.

Banks argued the pace of continued lending to fossil fuels did not breach their Paris agreement commitments because oil, gas and LNG were necessary transition fuels for the shift to a low-carbon economy.

CBA said: "It is the mix of energy sources that over time will assist with the transition to a net zero emissions economy and realising the Paris goal of limiting temperature increases to well below two degrees."

National Australia Bank spokeswoman referred to the bank's 2015 commitment to lend $18 billion in "environmental financing" by 2022. She said $11.76 billion of this had so far been delivered.

"NAB continues to support the energy sector and is committed to playing an active role in the orderly transition to a low-carbon economy to ensure Australians can have continued access to secure, reliable and affordable energy and support our economy," she said.

Market Forces, an affiliate of Friends of the Earth Australia, obtains its data from company filings and specialist news services that monitor bank lending.

Banks do not disclose directly comparable figures on their carbon exposure, but the banks' own figures on carbon exposure have also shown a decline in coal mine lending.

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