Westpac has joined the Net-Zero Banking Alliance, declaring that it wants to be “the transition partner of choice for our clients” and warning high-emitting customers that they have three years to put transition plans in place.
Membership of the NZBA commits the bank to aligning its lending and investment portfolios with net-zero emissions by 2050. This involves setting targets for “financed emissions” in its most emissions intensive sectors.
Yesterday the bank detailed the targets for four industries: thermal coal mining, upstream oil and gas, power generation and cement production.
Under NZBA rules it has 18 months to complete its targets. The chief executive of Westpac Institutional Bank, Anthony Miller, said the bank is currently looking at the commercial and residential property sectors, agriculture, transport and manufacturing.
Miller said: “One of the biggest challenges we face is getting information on emissions and ensuring the quality of the data, so you can set a path to net-zero.”
He said all targets would be backed by methodologies that that bank would document, plus annual disclosures.
Despite the complexities, Miller said the bank sees a big opportunity advising companies on their transition plans and financing transitions.
“We have been the biggest bank lender to greenfield renewable energy projects in Australia for the past five years. We have the banker capability and we are continuing to develop that,” he said.
The thermal coal mining target includes zero lending to companies with more than 5 per cent of their revenue generated directly from thermal coal mining by 2030. This is a change from the bank’s 2020 target, which limited exposure to customers generating more than 25 per cent of revenue from thermal coal.
Transaction banking and rehabilitation bonds are excluded from the target. At the moment the bank has a A$220 million exposure to the industry.
The upstream oil and gas target includes a requirement for a 23 per cent reduction in scope 1, 2 and 3 financed emissions by 2030, relative to a 2021 baseline. The bank will only consider directly financing greenfield oil and gas projects that are in accordance with the International Energy Agency’s Net-Zero by 2050 scenario, or where the project is necessary for national security.
The bank’s current exposure to oil and gas extraction is $2.4 billion. It will require customers to have “credible” transition plans in place by 2025.
The power generation target covers customers with “material revenue” from power generation and includes an emissions intensity limit for those customers of one-tenth of a tonne of CO2 emissions per megawatt hour by 2030. This is 40 per cent lower than the target the bank set in 2020.
The cement production target covers companies that produce clinker in-house and includes a limit of 0.57 of a tonne of CO2 emissions per tonne of cement by 2030.