CBA defends climate stance as investors back tougher action

Commonwealth Bank chairman Catherine Livingstone has rejected activist calls for the bank to cease financing all new fossil fuel projects, but says the lender is talking to big emitters about their plans for moving to a world of net zero emissions.

As markets put more weight on climate risks, a key theme of CBA’s annual general meeting on Wednesday was how the bank could continue lending to some fossil fuel businesses while simultaneously supporting the move to net zero emissions by 2050.

CBA chairman Catherine Livingstone says the bank supports Credit: Dominic Lorrimer

In a sign of the shareholder pressure on this issue, a resolution from environmental group Market Forces received 14 per cent support in proxy votes, despite being opposed by the bank’s board.

The resolution sought to have CBA commit to stop funding new fossil fuels projects and to have the lending giant disclose more detail on how it planned to meet the “net zero” target by 2050, which it has backed.

Ms Livingstone urged shareholders to oppose the resolution by stressing CBA’s practices would evolve in line with the latest projections on emissions and government policy developments, including the upcoming meetings in Glasgow.

But in a sign of the balancing act facing big Australian banks, she said CBA had a role in supporting fossil fuel clients in their transition, though it would only fund oil and gas projects that were aligned with the Paris climate goals.

“The board remains fully committed to CBA playing its part in limiting climate change in line with the goals of the Paris Agreement and supporting the transmission to net zero emissions by 2050,” Ms Livingstone said.

“Our policy is clear that we will not provide project finance to new oil and gas extraction projects unless they are Paris-aligned,” she said.

Also addressing the meeting, Market Forces Australian campaigns co-ordinator Jack Bertolus argued the bank could not have it both ways. He said climate science made it “abundantly clear” that achieving net zero by 2050 left no room for new fossil fuel projects.

“Failure to bridge this gap will leave Commonwealth Bank exposed to needless financial climate change transmission risks, as well as reputation and legal risks, as the world moves to rapidly decarbonise,” Mr Bertolus said.

CBA has committed to cutting its exposure to coal to zero by 2030, but a key debate is how banks should treat the oil and gas sector.

Alongside climate change - which is also set to be a key topic when CBA’s rivals hold their AGMs later this year - an equity grant to chief executive Matt Comyn also attracted opposition from a significant minority of shareholders.

There was a 19.3 per cent protest vote against the move to grant Mr Comyn up to $3.5 million in equity as part of his pay, but CBA easily avoided a first “strike” on its remuneration report, which won 95.2 per cent of the vote.

Influential proxy adviser ISS had recommended shareholders oppose the resolution on the equity grant, highlighting concerns about $1.75 million in restricted shares being granted as a “long-term alignment remuneration” (LTAR) award. Ms Livingstone defended the payment, saying such grants were aimed at attracting and retaining the best talent possible.

In Mr Comyn’s opening remarks, he reiterated CBA’s upbeat view on the economy, but also noted the boom in the housing market, which the lender is watching closely.

Matt Comyn’s comments are a sign of the caution within Australia’s largest bank towards the housing boom - a concern shared by regulators.Credit: Alex Ellinghausen

“Housing activity is still strong. We are continuing to monitor this closely and adjust our lending settings appropriately,” Mr Comyn said.

The banking regulator took its first step to curb higher-risk lending last week, and at the time Mr Comyn signalled more intervention may be needed.

Other topics raised by shareholders included the impact on local staff of CBA’s move to set up an Indian subsidiary, and its recent $6 billion share buyback.

CBA shares fell 1.6 per cent to $103.22 on Wednesday.

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