Greenwashing?
The Big Four Banks and Climate Change
This post was last updated in 2023
The big four – Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac and ANZ – have all stated their support for the Paris Agreement goal of net zero by 2050 and have recently set targets in line with this.
But is this all a bit of greenwashing? Do their actions match their words?
Well no, not really.
While the big four banks – CBA, NAB, Westpac and ANZ – have set emission targets to reach net zero emissions by 2050, their actions are not aligned with these goals. They continue to give new and additional funding to the fossil fuel industry, undermining the 2050 goal and locking in carbon emissions for years to come.
In this blog post, I answer the following questions, exploring the commitments and actions taken by each of these banks to address climate change:
While there is quite a bit that goes into being a green bank, as covered in What is Green Banking and What to Look Out For, a large part of being a “green bank” is addressing climate change and that is the focus of this blog post.
When it comes to addressing climate change, a key action banks can take is to stop funding any new or expanded fossil fuel projects. In May 2021, the International Energy Agency (IEA) concluded there was no room for new or expanded coal, oil and gas projects if we want to achieve net-zero emissions by 2050. So the actions of these banks will be looked at through this lens.
Furthermore, in the section below, I have summarised where these banks stand on:
- Operational emissions – reducing emissions relating to operating their business
- Green banking products – products that encourage sustainable living practices
- Funding sustainable initiatives – financing given to projects or companies engaged in sustainable activities, including clean energy production
- Financing emissions – reducing emissions relating to lending practices
It can be very difficult to get a hold of information that counters the rosy picture these banks paint for themselves but thankfully we have Market Forces, who conduct research on banks and their financing activities in the fossil fuels industry. So I have relied on information from their website to help assess whether these banks are doing enough.
So let’s get into it.
Is Commonwealth Bank a green bank?
Commonwealth Bank has set the most ambitious targets when it comes to reducing operational emissions and they have made some noticeable reductions in financing emissions. However, additional funding for gas and oil projects continues, so CBA can not be called a green bank.
- CBA has set a 42% reduction target for Scope 1 and 2 emissions (compared to the 2020 baseline)
- They are one of two banks to set a Scope 3 emissions reduction target at 25% (against the 2020 baseline)
- They are committed to ensuring 100 % of energy is sourced from renewables by 2030
- They are the only big bank to set an on-site renewable energy target of 2000 kW by 2025
- Where possible, they will lease new main commercial office spaces, and build new retail branches with a minimum 5-star Green Star rating
- They will maintain the operational performance of all main commercial spaces to a minimum weighted average of 4.5 stars as predefined by NABERS Tenancy Energy or its international equivalent
- They will transition over time to hybrid and battery-powered business-related motor vehicles
Achievements to date are summarised in the diagram below:
CBA offers the following “green” products for their retail customers. They have on offer:
- CommBank Green Loan – a 10-year secured fixed rate loan designed for existing, eligible home loan customers to buy and install clean energy products such as solar panels, battery packs and solar hot water systems.
- CommBank Green Home Offer – rewards eligible customers with access to a low standard variable rate if their home meets certain sustainability and energy efficient criteria
- CommBank Personal loan discount – lower interest rates for eligible sustainable purchases
CBA has a target to lend a total of $70 billion by 2030 to sustainable industries (starting from 2015).
As of 30 Jun 2022, they have provided $30.6 billion in funds to support growth in sustainable industries.
- CBA has committed to providing no project finance to new or expanded Thermal Coal Mines and new coal-fired power plants
- They will reduce their existing project finance exposure to Thermal Coal Mines and coal-fired power plants to zero by 2030
- Financing of upstream oil extraction will be reduced by 27% from a 2020 baseline
- Financing of upstream gas extraction will be reduced by 17% from a 2020 baseline
- Emissions from power generation will be capped to 405 kg CO2/MWh
- They will only provide project finance for new or expanded oil or gas projects or Metallurgical Coal Mines after an assessment of the environmental, social and economic impacts of such activity, and if in line with the goals of the Paris Agreement
- They will only provide corporate or trade finance to new clients in oil and/or gas producing, metallurgical coal mining or coal-fired power generation, who have publicly committed to the goals of the Paris Agreement, and after an assessment of the environmental, social and economic impacts
- They will not provide corporate or trade finance to new clients who derive 25% or more of their revenue from the sale of thermal coal
- They will reduce corporate and trade finance exposure to existing clients who derive 25% or more of their revenue from the sale of thermal coal to zero by 2030 and
- They will only offer corporate or trade finance to existing clients in oil and/or gas producing, metallurgical coal mining or coal-fired power generation, after an assessment of the environmental, social and economic impacts. From 2025, they expect these clients to have published transition plans
At present their exposure to the fossil fuel industry is $9.9 billion, or $4.5 billion excluding funding for networks and energy retailers.
From 2021 to 2022 there has been a 39% decrease in funding for gas, a 45% reduction in LNG terminals, 46% reduction in funding for coal and 27% reduction in funding for oil.
They make a point in their Climate Report that only 1% of lending is to the energy sector and this sector accounts for an estimated 27% of their 2020 financed emissions.
Property, agriculture and transport account for an estimated 60% of financed emissions in 2020.
Targets for other sectors will be developed over time.
So this is all good stuff right??
Out of all the big banks, CBA seems to have the best understanding of their emissions. And they have reduced their emissions substantially in recent times.
However, Market Forces note that CBA’s current policy leaves the door open to lend to clients with no plans to reach net zero. They have given customers until 2025 to develop these plans.
This allows CBA to lend to the likes of Santos and Glencore for the next 3 years.
In fact since 2021, CBA has been involved in at least 11 more fossil fuel deals with massive expansionary plans. They have deals with Santos, Glencore, and Beach Energy, all of which have plans for new fossil fuel production projects.
This will lock in decades of high emissions.
Some specific details Market Forces note on their website:
- CBA co-arranged a US$1 billion loan to Santos in August 2022.
- They co-arranged a $16.7 billion loan for Australia’s biggest coal producer, Glencore
They also note that CBA has set targets that allow it to increase lending to the oil and gas sector over the next eight years. This was a hard one for me to understand because I could see that CBA made a committement to reduce emissions in this sector against a 2020 baseline – however the graphs below show an increase in emissions can occur.
The reduction target for 2030 is higher than the level of emissions in 2021 CBA needs to re-baseline their targets if they truly want to reduce emissions steadily over time.
FInally, the targets for power generation seem weak – instead of a % reduction, it has set a capped amount. The capped amount equates to 0.4 tCo2/MWh, which is high compared to the other banks.
So sure, CBA has set funding reduction targets for fossil fuels but these targets do not seem to require any drastic changes in business practices and the door has been left open for new and additional funding for the fossil fuel industry to continue for years to come.
Is NAB a green bank?
NAB has provided the most funding in Australia, compared to other banks, to help expand the global supply of renewable energy. However their emission reduction targets are weak and in recent years NAB’s exposure to fossil fuels has increased, so they can hardly be called a green bank.
NAB has set targets to achieve the following by 2025:
- reduce Scope 1 & 2 greenhouse gas emissions (GHG) by at least 51% from 2015 levels.
- source 100% of electricity consumption from renewable sources
Further targets have been set around energy use, use of office paper, push towards digital statements, water use, waste produced, fuel usage and travel emissions. These are summarised in the table below.
The table above also summarises the key achievements in 2022.
There is no information on whether the reductions noted in the table above are against a 2019 baseline or a 2015 baseline. However, from their Climate Report we know the GHG emission reduction of 74% is based on a 2015 baseline.
Specialised products and services for retail customers are limited to:
- Sustainable Home Discount Offer – an interest rate discount to eligible customers on eligible home loans and a 5% discount on the cost of Lenders’ Mortgage Insurance when purchasing an eligible green property.
- Responsible investing advice – NAB connects individuals and families with specialist advisers from JBWere, one of Australia and New Zealand’s leading private wealth managers focused on responsible investing.
For farmers, they offer their Agri Green Loan, which is designed to help agribusiness customers invest in eligible on-farm practices and projects that aim to reduce greenhouse gas emissions and build resilience against climate-related risk.
NAB has funded more projects to expand the global supply of renewable energy than any other bank in Australia.
In 2022, they met and exceeded their 2025 environmental financing target, having provided a total of $70.8 billion to finance projects that help address climate change and support the transition to a low-carbon economy. This includes:
- $40.7 billion to support green infrastructure, capital markets and asset finance.
- $30.1 billion in new mortgage lending flow for new dwellings and significant renovations for 6 Star residential housing in Australia.
At the end of 2022, 73% of their total lending to the power generation sector was for renewables. Their exposure to renewables has gone up 76% in just five years and will continue to grow.
Here is a summary of the financing emission targets NAB have set :
- Thermal coal – a 100% decrease in absolute emissions by 2030, against a 2021 baseline.
- Power generation – a 32% decrease in emissions intensity by 2030, against a 2021 baseline.
- Oil and gas – a 21% decrease in absolute emissions to 3.2 MtCO2-e by 2030, against a 2021 baseline.
- Cement – a 24% decrease in emissions intensity by 2030, against a 2021 baseline.
As of 30 September 2022:
- Exposure to coal-fired power generation has reduced to zero
- Thermal coal mining exposure decreased to $0.42 billion (2022) from $0.52 billion (2021)
- Power generation exposure increased slightly to $7.36 billion (2022) from $7.18 billion (2021).
- Oil and gas exposure increased from $2.90 billion (30 September 2021) to $3.60 billion (30 September 2022).
- Oil and gas exposure (lending only) decreased to USD0.99 billion (30 September 2022) from USD1.53 billion (30 September 2021). NAB discloses its oil and gas lending exposures in USD as the majority of its lending is denominated in that currency.
So the not so great news...
According to Market Forces, from 2016 to 2020 NAB has invested over $9 billion in the fossil fuel industry.
And it doesn’t seem to be stopping:
- Market Forces calculated NAB increased their exposure to fossil fuels by 11% in 2022, with the increases primarily attributed to oil and gas extraction. Based on the figures noted above, funding for oil and gas expansion increased by 24%!
- NAB explained the increase was “significantly driven by passive movements in foreign exchange positions across the existing portfolio and is not due to an increase in underlying lending.” Market Forces did not buy that excuse, arguing that NAB needs to work to reduce its exposure to the sector and minimise the risk of currency movements blowing out its target.
- NAB has the lowest oil and gas emission reduction targets of all the big four banks and their reduction targets are based on a 2015 baseline. The emissions in 2015 are substantially higher than the later years, so the end result will be emission amounts that are potentially higher than any other bank (other than ANZ who also based their targets against a 2015 baseline)
- NAB has recommitted itself to LNG investments stating “NAB will continue to support integrated liquified natural gas (LNG) in Australia, New Zealand, and Papua New Guinea and selected LNG infrastructure in other regions.”
- In line with this policy, NAB participated in a loan facilitating the Pluto 2 LNG project, which will process gas from Woodside’s Scarborough gas field. Lifetime emissions from the Scarborough-Pluto project would be 1.6 billion tonnes of CO2, equivalent to 15 coal-fired power stations running for 30 years.
- While NAB will not provide project-based funding to the thermal coal industry, the door is still open to provide corporate finance to these companies. For example, NAB is still exposed to Whitehaven Coal with a loan due to reach maturity in 2023. This is a problem as, globally, corporate finance accounts for nearly 80% of the finance underpinning new coal production, dwarfing direct project finance.
NAB is heavily invested in the gas market so it is no surprise they have very weak targets for this sector. A 21% reduction from a 2015 baseline, where 2015 is likely to be a year with high levels of emissions to begin with, is weak to say the least.
Is Westpac a green bank?
Westpac has the strongest operational emissions reduction targets and they are the first to set targets for the real estate sector. However, like the other big four banks, their policy positions allow them to continue lending to the fossil fuel industry, so Westpac can not be called a green bank.
- Westpac’s target for operational Scope 1 and 2 emissions reduction is 64% by 2025 and 76% by 2030, relative to a 2021 baseline.
- Their target for Scope 3 supply chain emissions reduction is 50% by 2030 relative to a 2021 baseline.
- They aim to source 100% of global electricity consumption from renewable sources by 2025.
- They also aim to transition their Australian and New Zealand vehicle fleet to 100% electric or plug-in hybrid vehicles by 2030.
Green banking products
The only product on offer I could find was discounted car loans to purchase electric or hybrid vehicles.
Recently Westpac announced they will launch a new Green Home Loan with discounted rates for eligible customers, but this is not available as yet.
Other products and services Westpac offers are targeted towards commercial customers. On offer are:
- Sustainability-linked loans where loan pricing is tied to the sustainability performance of the company
- Green Tailored Deposits which allow customers to invest funds with Westpac to support the transition to a low-carbon economy.
Westpac aims to provide $3.5 billion of new lending to climate change solutions from 2020 to 2023, and $15 billion by 2030.
They note that this target will be updated in 2023 to reflect their priority and ambition to be the transition partner of choice.
The emission reduction targets set for each sector examined by Westpac are summarised in the table below.
In addition, there will be no project finance to greenfield coal-fired power generation facilities but when making decisions they will be taking into account the feasibility of emerging technologies, as well as energy affordability, security and reliability, along with the demands of these targets.
So what's wrong with all that...
Market Forces point out that Westpac’s targets fall short of what is required to meet a net zero by 2050 goal:
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Westpac’s target to reduce the emissions intensity of its power generation customers to 0.10tCO2e/MWh (tonnes of carbon dioxide equivalent per megawatt-hour) by 2030 would mean net zero won’t be reached until 2070.
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The bank’s commitment to reduce upstream oil and gas project finance emissions by 23% by 2030 falls short of the emission reductions in the International Energy Agency’s Net Zero by 2050 scenario (NZE), which requires combined oil and gas emissions to fall by 28% from 2019-2030.
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Westpac says it will consider directly financing new greenfield oil and gas projects that are in line with the NZE, even though this scenario explicitly rules out new oil and gas field developments.
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The policy offers a loophole for projects where the Australian or New Zealand Government or regulators determine that supply from the asset is necessary for national energy security. This means Westpac’s apparent climate change commitment can effectively be overruled at any time by the government of the day.
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Westpac’s expectation that customers will have developed credible transition plans by 2025 gives clients like Whitehaven Coal, Woodside and Santos three more years to open up new coal, oil and gas projects that are incompatible with the Paris Agreement and could operate for decades.
Market Forces have provided the following concerning examples of lending in recent months:
- In 2022 Westpac refinanced loans with Woodside. Woodside has several LNG expansion projects planned such as Scarborough off the coast of Western Australia and Sangomar off the Senegalese coast. Woodside also bought BHP’s petroleum business earlier this year, adding several other expansionary oil and gas projects to its books.
- Westpac also lends to Whitehaven Coal, which is planning to spend $2 billion on expansionary coal mining projects such as Vickery, Winchester South and Narrabri Stage 3. These projects will produce an estimated 1.14 billion tonnes collectively.
- Westpac is also party to a $1 billion loan to Santos in August 2022. Santos is currently pursuing multiple new oil and gas projects including the Narrabri gas project, the Pikka oil project, and the Barossa LNG project.
The International Energy Agency noted that investment in clean energy solutions needs to triple if we want to reach net zero by 2050. Westpac’s efforts in this regard are weak. Coupled with the fact that their financed emission reduction targets are not so great and the actions Westpac have taken since setting the targets have not been encouraging and it does not seem like Westpac is doing its part.
Is ANZ a green bank?
ANZ has the weakest emission reduction targets out there – both for their own operations and emissions relating to their lending activity. And given they are the biggest lending to the fossil fuel industry and that activity does not appear to be slowing down, ANZ can not be called a green bank.
ANZ has set targets to:
- Reduce Scope 1 and 2 operational emissions by 85% by 2025 and to 90% by 2030 (against a 2015 base year)
- reduce water consumption by 40% against a 2017 baseline
- reduce waste to landfill by 40% against a 2017 baseline
- reduce paper consumption by 70% against a 2015 baseline
Green banking products
I could not find any retail banking products that were set up to encourage customers to make more sustainable choices.
The sustainable products and services on offer for commercial customers are summarised in the table below:
ANZ set a target to fund and facilitate $50 billion by 2025 to support customers achieve improved environmental outcomes, including the reduction of their greenhouse gas emissions.
They have also noted they would fund and facilitate at least A$100 billion by the end of 2030 towards improving social and environmental outcomes for their customers. This includes initiatives that help lower carbon emissions, protect nature and biodiversity, increase access to affordable housing and promote financial well-being.
In their 2022 ESG Supplement Report, they also noted that they participated in 127 sustainable finance deals with a total deal size of $155 billion. In small print, they note of the 127 sustainable finance deals they participated in, $4.4 billion was attributed to ANZ via their distribution capability, and $13 billion via on-balance sheet loans and other credit lines.
Financing emissions
ANZ’s financing emissions reduction targets are summarised in the table below.
In their Climate-Related Disclosure report, ANZ notes that they are committed to a 100% reduction in funding to thermal coal by 2030.
So how does this all stack up...
Firstly the operational reduction targets look impressive at first glance.
But then I realise they are based on 2015 baseline figures, in which case you would hope there would be an 85% reduction since they would be starting from such a high level of emissions to begin with!
The funding targets for sustainable industries is not clear to me.
It’s not clear to me as a consumer what “fund and facilitate” means and what is being measured here. The $100 billion target to “fund and facilitate” projects that improve social and environmental outcomes do not seem comparable to the sustainable funding targets set by other banks.
It seems to be a target that captures funding at a point in time, considering existing exposure that may have been established years ago. I’m not sure.
This is different to the other banks that have set their targets around cumulative spending across a set time period.
As far as the financing emissions are concerned, looking at ANZ’s climate-related financial disclosure report, it is clear that financing emissions relating to power generation and oil and gas are on the rise.
And I found it very difficult to find details on their financing emission reduction targets.
While they have set targets, I could not find any other details on further restrictions on lending.
So it seems that the door is open for ANZ to continue providing uncapped lending to the biggest polluters out there.
And Market Forces note:
- From 2016 to 2020 ANZ has invested close to $14 billion in the fossil fuels industry
- Since 2021 ANZ has been involved in at least 33 more fossil fuel deals, including 18 for companies with expansionary plans and 4 direct project finance deals for new or expanded fossil fuel projects
- ANZ has signed off on deals for Santos, Viva Energy, Woodside, China Gas, Cooper Energy and Horizon Oil.
- ANZ also provided finance for the Pluto 2 LNG project in March 2022 which will process gas from Woodside’s Scarborough gas field and emit an estimated 1.37 billion tonnes of CO2 into the atmosphere.
- ANZ co-arranged a $1 billion loan to Santos in August 2022. Santos is currently pursuing multiple new oil and gas projects including the Narrabri gas project, the Pikka oil project, and the Barossa gas project.
And what is really frustrating is to see is the ANZ Chairman’s response to questions about their lending policy to the fossil fuel industry. At their last AGM, the Chairman repeatedly claimed that ceasing new or expanded funding would lead to an energy crisis.
Using that as their fallback argument allows them to increase lending to customers like Woodside and Santos, even though those companies plan to significantly increase oil and gas production this decade.
And as Market Forces point out, arguing that ceasing additional lending would cause an energy crisis does not hold.
Are the big four banks greenwashing?
And perhaps I am taking a very simplistic view of things, but as a consumer that cares about the environment, my expectation is if these banks are serious about doing their part to address climate change, they would be diverting the majority of new lending away from the fossil fuel industry and towards sustainable initiatives.
As mentioned at the beginning of this blog post, the International Energy Agency (IEA) has concluded there is no room for new or expanded coal, oil and gas projects if we want to achieve net zero by 2050. It doesn’t seem to be an unreasonable expectation – it doesn’t mean ceasing all funding but it means ceasing the funding of new projects.
And yet the banks have not taken steps in this direction.
Here is a depressing round-up of how much the big four banks have put into the fossil industry, and continue to pour into this industry (taken from the scorecards prepared by Market Forces):
In 2020 the big four loaned:
- $8.9 billion to the dirty coal, oil and gas industry, up 18% since 2019, bringing the total amount loaned since 2016 to $44.4 billion,
- $835 million for projects that expand the fossil fuel industry, enabling an additional 1.1 billion tonnes of CO2to to be released into our atmosphere, and
- $1.3 billion to major Australian fossil fuel companies pursuing plans consistent with the failure of the Paris Agreement, including $464 million to some of the most climate-destructive companies in Australia; Whitehaven Coal and Santos.
Taking a more holistic view, Catalyst, a non-profit research company, looked into the very question of whether the four Australian banks are greenwashing.
They conducted an in-depth study looking into the claims these banks make to uphold social and environmental performance standards and the actions these banks take in their lending behaviour. And they found the two often did not match. In their words:
An overview of the social and environmental performance of Australian and international banks using commonly accepted sustainability indicators reveals a schism exists between symbolic and substantive sustainability efforts.
The paper concludes that self-regulation has largely resulted in symbolic outcomes when it comes to addressing social and environmental concerns.
So yes, the big four banks are greenwashing – they claim to be taking great strides to address climate change but have largely failed to do this to date. They do have enormous market power, which they could use to dramatically shift funding towards sustainable activities, but this seems to be happening very slowly.
Let’s hope this changes soon!
xxx Tahsin
After more information? You may be interested in....
7 of the Best Australian Banks – For You and the Environment – there are 7 banks worth looking into if you care about the environment and key information on these is outlined here
How to Go Green in Banking and Choose the Best Bank For You – for a step-by-step process to help you choose the best green bank for you
What is Green Banking and What to Look Out For – for a definition of green, sustainable, ethical and eco-friendly banking, giving you clues into what to look out for
Green Banking – Essential Characteristics To Look Out For – outlining the characteristics of and features of green banking to look out for plus what it means to be a net zero bank
Why Green Banking Matters: Creating a Sustainable Future – if you are wondering if it is worth looking into green banking, you will find some honest answers here
Green Banking Products – Align Your Money with Your Values – for a summary of all the different green branking products out there, with links to banks that offer these
Which Banks Do – and Don’t – Invest in Fossil Fuels – for a summary of which Australian banks do and don’t invest in fossil fuels and those that do invest in renewable energy
Green Banks in Australia – Options Worth Considering – for information on the big four banks in Australia, four green banks in Australia and further details on Teachers Mutual
Going Green – Environmentally Friendly Banks in Australia – for further information on Bank Australia as well as CBA and Westpac, looking at their environmental policies
