CBA refuses to set an end date for financiing oil and gas projects
CBA chairman Paul O’Malley says debate on net zero emissions by 2050 has changed, but the bank has ruled out setting an end date for financing new oil and gas projects.
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Commonwealth Bank’s chairman Paul O’Malley says debate on net zero carbon emissions by 2050 has “pivoted quite dramatically” since the federal government introduced a nearer-term target, even as the bank ruled out an end date for financing new oil and gas projects.
Mr O’Malley – who took the bank’s chairman’s reins in August – stressed Australia had to focus on a “socially just” transition to a lower carbon economy, but having clearer national targets would assist the process.
“Having a federally legislated target of 43 per cent (reduction in emissions by 2030), my engagement with investors is we’ve now pivoted quite dramatically to how we deliver as distinct to whether or not we should deliver,” he said at a CBA climate briefing on Thursday.
Mr O’Malley urged engagement between policymakers, consumers and industry to be conducted in an “appropriate, proactive and caring way”, albeit with enough leeway to help stakeholders understand the required changes.
CBA’s analysis showed there were 800,000 of its customers, with $14bn in home loans, were currently living in regions with a “high dependency” on coal mining.
The bank’s chief executive, Matt Comyn, said those people required a plan “to manage the transition” as Australia moved to a net-zero emissions economy.
He noted cities such as Newcastle were looking at developing new industries as communities assessed a move away from higher-emitting industries.
CBA has set a 2030 target to cut its financed emissions in thermal coal mining to zero, but in other sectors the reduction will occur in a phased manner.
The bank has set its first sector-level targets – across four priority sectors – for reduction in financed emissions, aligning with an aim to limit global warming to 1.5 degrees Celsius. They span power generation, upstream oil, upstream gas and thermal coal mining.
Mr Comyn said: “We have a clear policy around oil and gas … the policy sets the boundaries, and then we make decisions during the course of the year within those boundaries.”
The bank noted a 35 per cent reduction in financed emissions to upstream oil extraction customers in 2021, from the previous year, while financed emissions in upstream gas extraction fell 30 per cent.
But CBA has faced criticism of its climate targets by activist group Market Forces for continuing to finance new oil and gas projects.
Market Forces has put two shareholder resolutions to the CBA annual meeting on October 12, which CBA’s board urges investors vote against.
The first resolution relates to a proposed amendment to the bank’s constitution which, if approved by 75 per cent or more of votes cast, would result in a further motion regarding “climate risk safeguarding” being put to shareholders.
It calls for disclosure of information showing how CBA’s financing won’t be used for new or expanded fossil-fuel projects.
CBA’s first stand-alone climate report, released in August, outlined the scale of the challenge. It said a move to net-zero emissions by 2050 would require $2.5 trillion to $3 trillion of investment, or a similar level to Australia’s mining investment boom in the decade to 2015.
The climate report also showed CBA has $32bn in loans, or about 5 per cent of its Australian mortgage book, in areas deemed high-risk for cyclones, flood and fire.
Mr Comyn said bilateral discussions were occurring between banks and insurers, and between associations on the issue, while he was “very supportive” of changes to building standards that would boost resilience of homes.
Mr O’Malley, who is also the former BlueScope chief executive, said that drawing on Australian Energy Market Operator data, CBA could play a big role in the financing of renewable energy.
“Storage capacity even between now and 2030 has to increase sixfold. Grid scale, solar and wind has to increase three times; for those projects to get up they need to access funding and CBA is absolutely wanting to be a lead lender to the increased renewables we need to support the grid,” he added.
The bank has reviewed 100 carbon-intensive customers, and had engaged with 82 to gauge how they were assessing climate-related risks and the transition period.
Just 22 of those reported they had a transition plan they were “ready to share” with CBA, its climate report said.
Mr O’Malley noted that figure was not a concern to the bank as the engagement was deemed as positive.
“What’s really important is the engagement has started,” he said.
Climate scenario analysis had been completed for 74 per cent of CBA customers, which would be used to inform strategy, lending decisions, and product and services development.
By 2025, CBA aims to have targets for sectors accounting for more than 75 per cent of financed emissions in 2020.
CBA and its major local rivals have all joined the United Nations-convened Net-Zero Banking Alliance, after Westpac rounded out the group by signing up in July.
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