From laggards to leaders

Cutting pollution rapidly this decade (ranked out of 21 points)

The largest five banks in Australia have all made a commitment to reach net-zero emissions by 2050 or sooner. But the climate crisis requires big cuts in pollution this decade. Every step banks take today to combat greenhouse gas emissions matters more than their actions in one or two decades.

This section evaluates the actions banks have committed to take during this critical decade, examining the strength of the 2025 and 2030 targets that banks have in place to support their 2050 net-zero commitments. It analyses whether banks have set a comprehensive short-term emissions reduction target and targets for the polluting industries they finance. It also assesses the actions that banks are taking to support and fund solutions to drive down emissions such as renewable energy and whether banks have set an ambitious target to source the majority of their electricity from renewable energy sources. 

How the banks perform on their targets:

• 13.2 \ 21

  

  ANZ

  ANZ has set 2030 emission reduction targets for oil and gas, power generation, aluminium, cement, steel and commercial real estate. ANZ must strengthen its short-term targets by including other polluting sectors and extending them to cover all banking services, as well as adopting a portfolio-wide 2030 target. It currently sources only 39% of its energy from renewable sources, while three of their peers already source 100% of their energy from renewables .

• 12.2 \ 21

  

  Macquarie Bank Group

  Macquarie has set 2024 coal-phase out target and has set 2030 targets to reduce pollution from oil and gas and motor vehicles. Macquarie must strengthen its targets by extending them to cover all polluting sectors and all banking services. Macquarie does not yet have a portfolio-wide target, and does not yet have a sustainable finance target. Macquarie currently sources 100% of its electricity for its own operations from renewable energy sources.

• 14.2 \ 21

  

  Westpac

  Westpac has committed to phase out finance for thermal coal by 2030 and has set pollution reduction targets for oil and gas exploration and production, power generation, cement and Australian commercial real estate.  Westpac should improve the integrity of its targets by extending them to cover all banking services, and include other polluting sectors. Westpac does not yet have a portfolio-wide target. Westpac already sources 100% of its energy for its own operations from renewable sources.

• 13.7 \ 21

  

  NAB

  NAB has set 2030 targets for thermal coal, oil and gas, power generation and cement, but these only cover its lending activities. NAB could improve the integrity of its targets by extending them to cover all banking services, and include other polluting sectors. NAB does not yet have a short-term emission-reduction target to cover all of its activities. NAB currently sources 72% of its energy from renewable sources.

• 14.2 \ 21

  

  Commbank

  Commbank has set 2030 targets for power generation, thermal coal mining and upstream oil and gas mining, aluminium, cement, residential real estate and steel, but these only cover its lending activities. Commbank should improve the integrity of its targets by extending them to cover all banking services, and adopt targets for other polluting sectors. It does not yet have a portfolio-wide target. Commbank sources 100% of its electricity for its operations from renewable energy sources.

How the banks actually drive down pollution (ranked out of 35 points)

Strategy and action measures the real world policies and practices’ that banks have in place to achieve their short and long-term commitments to reach net-zero emissions. Banks lost significant points in this section for their continued financing of new or expanded coal, oil or gas production and deforestation. In order to limit warming to 1.5°C above pre-industrial levels, we need to have policies and processes right now which end the flow of money to climate-wrecking industries – commitments to take action in the future are not enough.

This section also assesses whether banks require their customers to adopt a transition plan that is aligned with a 1.5°C pathway and whether banks provide transparency on how they assess the credibility of these transition plans. How banks will assess the credibility of their customers' transition plans is incredibly important, as there exists a great deal of variability in the strength and integrity of companies’ plans to reach net zero, with many companies lacking ambition.  It also scores banks based on whether they have a policy against deforestation, as protecting and restoring nature is critical for a safe climate.

How the banks perform on their strategy and action:

• 5 \ 35

  

  ANZ

  ANZ does not provide direct finance to new thermal coal projects but has not yet ruled out finance to companies building new coal, oil or gas projects or expansions. ANZ requires only its 100 most polluting customers to adopt a transition plan by 2025, but it is not yet clear how these plans are assessed, or the consequences of failing to have a plan. ANZ does not have a policy on deforestation.

• 7.5 \ 35

  

  Macquarie Bank Group

  Macquarie is the only one of the big five banks to rule out lending to companies building new coal mines but does not have an equivalent policy for oil and gas projects. Unlike the other big 5, Macquarie does not require its customers to develop transition plans. It also does not have a policy on deforestation.

• 3.75 \ 35

  

  Westpac

  Westpac says it will only directly finance new oil and gas projects that are consistent with the International Energy Agency roadmap, but has not yet ruled out providing finance to companies building new or expanded coal, oil or gas projects. Westpac also expects its customers to have credible transition plans by 2025 but does not define how it assesses transition plans or the consequences for failing to have a plan. Westpac does not have a policy on deforestation. 

• 7.5 \ 35

  

  NAB

  NAB does not provide direct finance to new thermal coal projects or new oil projects, but it has not yet ruled out finance to companies building new coal, oil or gas projects or expansions. NAB requires customers in some polluting industries to adopt a transition plan by 2025, but it is not yet clear how these plans are assessed or the consequences of failing to have a plan. NAB does not have a policy on deforestation. 

• 12.5 \ 35

  

  Commbank

  Commbank states that it will not provide direct finance to new thermal coal projects and expansions, but its policy allows Commbank to lend money to companies who are building new or expanded coal projects. Commbank has a policy limiting finance for new oil and gas projects, but no policy restricting finance to companies involved in oil and gas expansion. While Commbank has said it requires its customers to have a transition plan in place by 2025 and has detailed how it will assess these plans, it has not detailed the consequences of failing to adopt a transition plan. The bank does not have a policy on deforestation.

Making business leaders accountable (ranked out of 28 points)

When it comes to any topic, it is very important that leaders hold relevant expertise, have high quality information to effectively manage risk, and that responsibilities are clearly allocated to ensure accountability. It is also important that leaders have incentives in place to ensure that they are motivated to perform their best. 

This section analyses the governance structures that banks have in place to inform and execute their net zero commitment. It assesses whether banks have adequate information to guide decision-making and whether there is clear accountability for climate related topics. It also assesses whether the leaders of the banks have the relevant skills needed to effectively manage climate-related risks and if they are appropriately incentivised to manage the risks to the best of their ability.

How the banks perform on their governance:

• 7 \ 28

  

  ANZ

  ANZ states  that climate change is a board-level priority, but lacks climate expertise on its board and there is no evidence that management has incentives to meet climate change targets. Concerningly, there is no evidence that ANZ has conducted its own scenario analysis to determine the impacts of climate change and the energy transition on the bank. ANZ could improve its score by engaging more actively in climate change policy and conducting an annual review of its industry association memberships.

• 17.32 \ 28

  

  Macquarie Bank Group

  Macquarie has made climate risk management a board-level priority. The group has disclosed details of its risk assessments for climate change and the energy transition, although it is yet to quantify the likely impacts of climate change on the business and its customers. Macquarie could improve its score by linking a proportion of executive pay to achieving climate targets and engaging more actively in climate change policy, including through an annual review of its industry association memberships.

• 17.32 \ 28

  

  Westpac

  Westpac has made climate risk management a board-level priority. The bank has disclosed details on its risk assessments for climate change and the energy transition. Westpac could improve its score by linking a proportion of executive pay to achieving climate targets and engaging more actively in climate change policy, including through an annual review of its industry association memberships.

• 20 \ 28

  

  NAB

  NAB has made climate risk management a board-level priority. The bank has disclosed details on its risk assessments for climate change and the energy transition. NAB could improve its score by linking a proportion of executive pay to achieving climate targets and engaging more actively in climate change policy, including through an annual review of its industry association memberships.

• 20 \ 28

  

  Commbank

  Commbank has made climate risk management a board-level priority and has disclosed details on its risk assessments for climate change and the energy transition. Commbank could improve its score by linking a proportion of executive pay to achieving climate targets and engaging more actively in climate change policy, including through an annual review of its industry association memberships.

How we know what’s actually happening (ranked out of 16 points)

Disclosing information transparently and consistently is essential for comparing the performance of banks. In Australia, we don’t yet have mandatory climate-related financial reporting, so banks report varying levels of information and in different ways. 

This section assesses whether banks comprehensively disclose their financed emissions, provide transparency on the method used in their calculation and whether they obtain a third party opinion on their sustainability reporting. It also assesses whether the risks of climate change have been taken into consideration in the audit of the banks’ financial statements and whether banks have provided a list of activities that are eligible for financing based on their contribution to positive social or environmental outcomes.

How the banks perform on their reporting:

• 9.5 \ 16

  

  ANZ

  ANZ reports its financed emissions for a portion of its loan book, but these do not cover all the activities of the bank, and the bank does not provide a breakdown of its financed emissions for all emissions intensive sectors, which reduces accountability. ANZ includes polluting gas projects as part of its sustainable finance portfolio, and unlike many of its peers does not consider how climate change could impact the company in its audited financial statements.

• 9 \ 16

  

  Macquarie Bank Group

  Macquarie has disclosed financed emissions for some polluting sectors, but this has not been done across Macquarie’s entire portfolio. Whilst Macquarie has not set a climate solutions financing target, the group has disclosed types of activities that qualify for financing. Macquarie is not yet including the impacts of climate change in its audited financial statements.

• 11.67 \ 16

  

  Westpac

  Westpac has disclosed its financed emissions for most of its lending portfolio, but could improve on this by disclosing financed emissions for all of the significant financial services that it offers. Westpac does not require its auditor to consider the impacts of climate change in its audited financial statements.

• 13.84 \ 16

  

  NAB

  NAB has disclosed its financed emissions for most of its lending portfolio, but could improve on this by disclosing financed emissions for all of the significant financial services that it offers. NAB could also specify that its sustainable finance explicitly excludes gas.

• 15.34 \ 16

  

  Commbank

  Commbank has disclosed its financed emissions for most of its lending portfolio, achieving close to full points on this indicator. Commbank could improve on this by disclosing financed emissions for all of the significant financial services that it offers.