Westpac has tightened lending standards for borrowers in the oil and gas sector as part of its commitment to lowering greenhouse emissions.
Under a revised policy revealed in the first half profit presentation, the bank says it will no longer accept loan applications from new borrowers in the oil and gas sector unless they can show their operations are aligned with reducing emissions set by the Paris Agreement.
Westpac is one of the first banks in the world to implement such a requirement and says it is working with existing oil and gas borrowers to bring their businesses into line with the Paris targets.
The tightening of the lending policy follows a review of how the bank’s credit risk exposures to the oil and gas sector would be affected by global efforts to constrain global warming to less than 2 degrees above pre-industrial levels.
Westpac conducts regular reviews of its lending policies to ensure its lending to fossil fuel explorers and producers is in line with its publicly-stated commitment to help achieve the Paris targets.
“Our updated approach means we will expect any new oil and gas exploration, production and refining customers, to whom we provide lending, to have publicly disclosed Paris-aligned business goals,” the bank told shareholders in the interim financial report.
Westpac and other Australian banks are under pressure from climate lobby groups to deepen their commitments to lowering carbon emissions.
Market Forces, the country’s most active climate lobby group, last night acknowledged the change to Westpac’s lending policy as a turning point for the domestic banking industry, but insists the bank’s approach to oil and gas companies is still inconsistent with achieving the Paris targets.
“While still far from aligned with the Paris Agreement, Westpac’s announcement today signals the beginning of the next wave of bank exclusion and divestment from fossil fuels, this time targeting polluting oil and gas,” said Market Forces’ campaign coordinator, Jack Bertolus.
“Disappointingly, Westpac hasn’t applied the same standard to its existing oil and gas customers, many of which continue to expand the sector, including Santos and Woodside.”
National Australia Bank is currently conducting a review of its credit exposure to the oil and gas sector and is expected to amend lending criteria by the end of the year.
Bertolus singled out ANZ as a laggard in aligning its lending policies for oil and gas companies with global emissions targets.
“Westpac’s approach sits in direct contrast to ANZ, which essentially ignored oil and gas in its October climate and energy policy update, leaving it as the perpetual climate laggard of the Australian banking sector.”