ANZ digs in over energy loans: bank says figures show its support for carbon transition

ANZ has ramped up its defence against a growing backlash towards banks’ financing of carbon emitters.

ANZ AGM at Melbourne Convention Centre. CEO Mike Smith and Chairman David Gonski

ANZ, the largest lender of the big four banks to the mining sector, has increased its defence against a growing backlash towards banks’ financing of carbon emitters, installing new reporting measures and claiming its job is not to be the “moral police”.

At its annual meeting yesterday, where the bank also faced scrutiny over its financing of farmers and Timbercorp, chairman David Gonski sought to allay the carbon concerns by releasing greater detail about the bank’s lending to power generators.

The figures showed that ANZ’s financing led to an average 0.69 tonnes of carbon dioxide per megawatt hour of electricity generated, which was 20 per cent below the Australian average.

Overseas, it was 17 per cent below the various grid averages.

“This new disclosure shows we are supporting the transition to a lower carbon economy,” said Mr Gonski, adding that it would enable ANZ to track the reduction of “emissions intensity” in its energy portfolio, 23 per cent of which was coal-fired.

“We believe this is a practical step forward and I understand that this places ANZ at the forefront of financed emissions reporting ­globally.

“We are equally committed to work with government, business and the community to address the policy risks associated with energy supply and climate change.”

Acknowledging environmentalists at the AGM and their criticism of banks’ support of the coal industry, ANZ chief executive Mike Smith added that the bank was also the nation’s largest financier of renewable energy projects such as wind power.

However, the typically outspoken Mr Smith failed to take a shot at the Murray Financial System Inquiry and its recommendation that the banks increase capital levels.

Scrutiny of the role of banks in carbon projects has intensified recently, particularly in Queensland around the Galilee Basin and Abbot Point coal port expansion, given their proximity to the Great Barrier Reef.

The Australasian Centre for Corporate Responsibility, a not-for-profit organisation promoting ethical investment, used its small shareholdings in ANZ and Commonwealth Bank to force a vote at the banks’ AGMs to provide more clarity on their ­financing of greenhouse gas emissions.

National Australia Bank yesterday also faced concerns from shareholders about the Galilee Basin and Abbot Point, where India’s Adani is seeking funding for a $7.2 billion coal ­project.

Mr Gonski said the bank ­assessed lending to power generators on the same basis as other customers, including trying to ensure that the funds were used in line with its “obligations to society”.

“We know that there is a range of views on how the world can transition to a lower carbon economy,” he said. “As a company, it’s not our job to act as the moral police or take on the role of government. Our job is to ensure the sustainability of our business and to do the right thing by our stakeholders …. staff, shareholders and the broader community.”

According to Morgan Stanley analysts, ANZ has the largest exposure to the mining sector at $17.5bn — 40 per cent of which is to oil and gas. But outside of the slowing mining boom that may push bad debts higher, ANZ may also need $6bn to meet the Murray inquiry’s capital call, according to Macquarie analysts.

Mr Gonski backs the inquiry’s “principles-based approach” and assured investors that ANZ had a range of options to meet the ­inquiry’s call for banks to be “unquestionably strong”. He reiterated the bank’s forecast that the economy would grow “somewhat more slowly” next year. “As a country we have dealt with extraordinary challenges over the past decade and there is no reason to expect we will not see sustained economic growth over the longer term,” he said.

Mr Smith also dismissed suggestions ANZ would be following CBA’s $1bn-plus overhaul of its core technology system, saying the bank was well placed to “fast-track the change to a digital culture” without a core update.