ANZ avoids oil and gas caps but asks for trust

ANZ Bank will continue to fund the oil and gas sector and new projects, but only if companies have credible plans to achieve net zero by 2050.

CEO Shayne Elliott: ‘Some of this comes down to trust.’ Picture: Arsineh Houspian

ANZ Bank will continue lending to the oil and gas sector and fund new projects if companies have credible transition plans to achieve carbon neutrality by 2050.

Chief executive Shayne Elliott also told an environmental, social and governance briefing that climate-related targets in relation to the lending portfolio would play an increasing role in determining variable pay for senior executives.

ANZ’s updated climate policy, which included a general position on the oil and gas sector, amounted to a clear departure from National Australia Bank’s $US2.4bn ($3.4bn) cap on its exposure to the sector until 2026, followed by a reduction in alignment with the International Energy Agency’s net-zero scenario.

Mr Elliott said on Friday that the bank had considered caps, but decided they could lead to perverse outcomes by lowering exposures to companies which were “doing the right thing”.

“It’s complex; some of this comes down to trust and we have to earn that,” Mr Elliott told the ESG briefing.

“It’s nice to have black and white rules but life is more complicated than that.”

Conceivably, he said, ANZ’s financed emissions could increase under its approach to the oil and sector.

Funding of new projects, however, would be the exception rather than the rule, with the bar to be set “significantly” higher than for existing customers.

The companies’ transition journeys would also have to be more advanced.

Like with NAB, the ANZ policy attracted the immediate wrath of activist groups.

The Australian Conservation Foundation said that, despite announcing a review of its lending policy to the oil and gas sector in September, ANZ still refused to acknowledge that the extraction and burning of gas and oil was a driver of climate change.

ACF economy and democracy program manager Matt Rose said ANZ had neglected to set meaningful targets for divesting from oil and gas, in line with its 2050 commitment.

“The policy leaves open the door for ANZ to fund new gas projects,” Mr Rose said.

“The Australian Conservation Foundation will continue to campaign for ANZ to take responsibility for its support for the oil and gas industry — and urge the bank to fully divest from oil and gas by 2030 — by engaging with customers, staff and investors.”

Market Forces said the bank was free to continue pouring billions of dollars into new fossil gas developments.

“Failure to rule out lending to new fossil fuel projects and the companies pursuing them demonstrates the policy is not up to scratch,” campaigner Jack Bertolus said.

“(Yesterday’s) update is nothing more than a shuffling of the chairs on the Titanic.”

ANZ institutional boss Mark Whelan also announced plans to cut the intensity of emissions in two key sectors: power generation, which accounts for about one-third of the nation’s emissions, and large-scale commercial buildings.

The bank set a new target to slash the emissions intensity of its power generation portfolio in half by 2030.

The emissions intensity of the non-residential buildings portfolio, which is one of the biggest end users of electricity, will fall 60 per cent, also by 2030.

Mr Elliott said the world was transforming rapidly, most importantly through how energy was produced, distributed and consumed.

Key sectors which were capable of decarbonising were doing so, such as vehicle fleets and manufacturing.

“At the same time, new sources of green electricity, battery options for storage, different distribution networks and hydrogen solutions will need to be developed,” the ANZ chief said.

“There’s also options like carbon capture use and storage, which has a role over the medium to long term, to support those industries not easily decarbonised.

“And change is also being seen in financial markets and systems — driven by regulatory, customer and community expectations — and this is impacting how climate risk is assessed, managed, reported and priced.”

Mr Elliott said trillions of dollars were needed for the world to transition to net zero by 2050, with an ANZ slide quoting a $US125 trillion ($175 trillion) estimate for the global cost.

“And banks have a key role, and significant opportunity, in arranging, directing and distributing the finance required,” he said.

“We believe we are well placed to shape, and support, the required transition — we are Australia’s only truly regional bank with a network connecting customers to low carbon opportunities across the global economy; we have the right customers who are embracing the transition; we are a leader in banking resource and infrastructure projects.”

ANZ, according to Mr Elliott, had a 5 per cent share of global flows in sustainable finance in 2021, participating in 81 transactions with a total deal size of $119bn.