Westpac, NAB leave door open on oil and gas finance amid climate push

Two of Australia’s biggest banks have left the door open to financing new oil and gas projects as they pitched their climate credentials amid a national debate about funding for fossil fuel projects.

Westpac will pressure corporate borrowers to cut carbon emissions by setting new targets for clients in electricity generation, cement manufacturing and oil and gas, though it could still fund new fossil fuel projects if pushed by government, the bank said in an update to the market on Wednesday.

Westpac chief Peter King said Australia’s transition to renewables was critical.Credit: Dominic Lorrimer

Amid pressure from investors and regulators over climate risks, Westpac announced detailed targets for the carbon emissions released by its big corporate customers - known as “financed emissions”. Under the policy, customers in these sectors will be required to develop credible plans for cutting their emissions.

In oil and gas, Westpac wants to cut its financed emissions by 23 per cent by 2030, compared with 2021. However, the bank will continue to provide corporate loans (as opposed to finance for specific projects) to existing oil and gas clients, if they have a “credible transition plan” by 2025.

Westpac also said it would consider financing new oil and gas projects if regulators said such projects were needed for energy security.

Labor introduced its signature climate legislation to the House of Representatives on Wednesday, pledging to cut emissions by 43 per cent from 2005 levels by 2030. The government has refused to bow to pressure from the Greens, who want funding blocked for all fossil fuel projects.

On Wednesday, chief executive of Westpac Institutional Bank Anthony Miller said the bank was keen to work with clients to cut their emissions. This could include changes to their business operations, alongside the use of carbon offsets.

Under the policy, Westpac will aim to slash the emissions intensity of its electricity lending portfolio by more than 50 per cent by 2030, compared with 2021 levels.

Dr Stuart Palmer, head of ethics research at Australian Ethical, which holds Westpac shares, said the bank’s policy was based on credible climate scenarios, but continuing with corporate lending to oil and gas clients until 2025 was a big gap.

“That’s too long. What the requirements will be for those plans raises a whole lot of issues,” Palmer said.

NAB chief Ross McEwan will announce a new chief climate officer role.Credit: Louie Douvis

National Australia Bank, which on Thursday will announce a new chief climate officer role, is the only bank to place a cap of $US2.6 billion ($3.2 billion) on oil and gas lending, releasing its policy in November last year. It will reduce its exposure from 2026 to 2050, and won’t finance new or expansions of coal-fired power facilities.

NAB’s policy bans directly financing greenfield gas extraction projects- unless the government declares a new project crucial to national energy security. Environment groups last year criticised this, claiming it created “massive loopholes” for the expansion of oil and gas.

NAB chief executive Ross McEwan stood by the policy on Wednesday, as he released research commissioned by the bank into the economic opportunities of the transition to a low-emissions economy.

“Gas is a transitioning fuel. We haven’t, to date, put any money in because we’ve been asked to from a security source. We remain of the position that we have got a cap on our portfolio and we’re putting the vast majority of our money into renewables,” he said.

NAB’s research, by Deloitte, found that $20 trillion is set to be invested into the economy from now to 2050 but that this will need to be drastically reallocated if Australia is to emerge as a strong economy in a global low-emissions environment.

It described this task as the “great reallocation” of capital, and said the scale and magnitude will be unmatched to any structural adjustment the modern economy has seen.

The report found that $420 billion in new investment will be needed to 2050 to achieve a successful transition. Of this, $400 billion will need to go to four areas that represent 90 per cent of emissions - energy, mobility, raw material manufacturing, and food and land use.

McEwan said the report showed that the transition to a strong low-emissions economy was doable without an enormous increase in spending by business and government.

“I think people have got a little bit caught up in, can we afford this? Is it doable? It’s absolutely doable, but we need to get going,” he said.

ANZ and CBA have also not ruled out lending to new oil and gas projects. NAB, Westpac and ANZ faced criticism earlier this year from climate advocates for helping to fund a private equity group’s acquisition of a stake in the expansion of Woodside Petroleum’s Pluto gas plant in Western Australia.

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