New research shows $260 billion of all outstanding Australian bank loans, or 22% of bank lending, is to sectors that carry a high risk of impacting nature.
The research by Ernst & Young Australia, commissioned by the Australian Conservation Foundation, shows livestock agriculture, which holds $47bn of outstanding loans from leading Australian banks, is the subsector responsible for the biggest impact on nature.
Property, resources and energy were also identified as sectors with high impact on nature.
The research sets out six legacy banking practices that act as barriers to protecting and restoring nature and identifies ten actions banks can take now to make their lending practices consistent with the UN Global Biodiversity Framework. Four such actions are to:
- Set science-based targets for reducing nature impact.
- Adopt no deforestation policies in line with global best practice voluntary commitments.
- Incorporate ecosystem services into land valuations to avoid perverse incentives.
- Apply nature risk and opportunity frameworks to bank operations and value chains.
Report author, EY Australia’s Climate Change and Sustainability Partner, Emma Herd, said:
“Nature and biodiversity risks are increasingly becoming part of the risk landscape for finance, as global commitments consolidate and national regulatory settings tighten. There are also significant opportunities for banks which act now to establish strong approaches to nature risk management and work with their clients to deliver rich biodiversity outcomes for Australia.”
The Australian Conservation Foundation’s Corporate Campaigner, Jonathan Moylan, said:
“Australia is a global leader in mammal extinctions and a significant proportion of bank lending is to sectors that have a high impact on nature, so banks have serious clout when it comes to halting and reversing nature damage.
“Financial institutions and governments have strong reasons to act, given the economy’s dependence on nature and the fact that 75% of land and 66% of marine environments have been significantly altered by human activity.
“Farmers who promote the long-term resilience of their farms and landscapes – by taking actions like retaining biodiversity corridors, planting shelter belts and fencing off creeks and paddock trees – are not rewarded by legacy valuation methods. This is because vegetated land is considered to have less worth, despite the ecosystem services nature provides.
“This has led to a situation where property developers are incentivised to buy land, clear it and sell it at a much higher price, causing long-term damage to biodiversity and agricultural productivity.
“By recognising the value of nature in land valuation, banks can remove this perverse incentive and reduce the trade-offs for farmers who are trying to do the right thing.”
