Westpac first big bank with zero-deforestation commitment

The nation’s second-largest lender has set a zero-deforestation target for loans to beef, dairy and sheep farmers.

Westpac has become the first big Australian bank to set a zero-deforestation target for loans to beef, dairy and sheep farmers, while also linking a portion of executive short-term bonuses to achieving climate targets.

Westpac’s inaugural Natural Capital Position Statement, released on Monday, outlines its ambition to “become a nature-positive bank” and includes a commitment for no further conversion of natural forest to agricultural use within farm systems from December 31, 2025.

Westpac’s climate report also says it will no longer directly finance new (greenfield) coal, oil and gas projects, releasing more detail about its expectations for business customers in eight out of nine key carbon-intensive sectors.

This includes a requirement for oil and gas companies to have a 1.5 degree-aligned transition plan by Sept 2025.

The deadline, climate groups said, was a delay of nine months.

“Every delay is costly,” Market Forces campaigner Kyle Robertson said. “(Westpac) has gone backwards by providing nine extra months of funding for its most polluting fossil fuel customers before they must disclose credible emissions reduction plans.”

The sectors with emission reduction targets include oil and gas, coal, power generation, cement, iron and steel, transport, commercial real estate, residential real estate and agriculture. Targets for aluminium will be introduced in 2025.

Westpac chief executive Peter King. Picture: Richard Dobson

Chief executive Peter King said the biggest impact the bank could have was helping lower the emissions intensity of its lending portfolio – also known as scope 3 financed emissions, and accounting for 99 per cent of the bank’s overall emissions.

The bank said it was piloting a new framework for some of its higher-emitting customers to support engagement and assessment of their emissions reductions plans.

“We are also here to partner with customers on the opportunities that a transition of this magnitude presents,” Mr King says in the report.

“Decarbonising the economy requires significant investment, and we have a big role to play helping customers as they implement their transition plans.”

Climate groups, which had previously criticised Westpac and the three other major banks for not tracking the impact of their lending operations on deforestation, welcomed the introduction of its no net-deforestation policy.

“We would expect Westpac’s decision to adopt a zero-deforestation policy for beef, dairy and sheep farming to drive a wave of zero-deforestation commitments across Australia’s banking sector,” ACF campaigner Jonathan Moylan said.

“While the scope of Westpac’s commitment could be broader, it should help rein in Australia’s unfortunate status as a global deforestation hotspot by focusing on the main driver of land clearing in Australia: pastoral expansion,” he added.

Most of the approximately 500,000 hectares of threatened species habitat bulldozed in Australia every year primarily for sheep and cattle grazing is financed by a bank, the group said.

Westpac also said it will introduce new climate-related measures in short-term variable remuneration metrics for the CEO and group executives that support the implementation of the plans.

Originally published as Westpac first big bank with zero-deforestation commitment