Australia can be a climate-change leader, says ANZ’s Mark Whelan

Policy clarity and transition targets are two of the necessary ingredients for Australia to be a climate-change leader, according to ANZ Bank institutional boss Mark Whelan.

Mark Whelan, head of ANZ Bank's institutional division: ‘There’s plenty of opportunity and the outcome should be really good for the climate.’ Picture: Stuart McEvoy

Policy clarity on climate change and transition targets are key to an emerging acceptance that Australia can be a market leader in a carbon-neutral world, according to ANZ institutional boss Mark Whelan.

Mr Whelan, who recently returned from an ESG roadshow through London, Frankfurt and Amsterdam, said global capital had Australia on its radar.

“The external market looks at us and says: ‘Well, you could be a real market leader here, but we want to see some policy clarity and targets’, and I think we’re progressively doing that,” he said.

“I also don’t think we’re making enough noise about some of the good things we’re doing in hydrogen and the renewable energy zones, which are all positives.

“Corporates are really committed to this, and funds are wanting to put their capital here.”

European regulators, investors and corporations are widely seen as being in the vanguard of global institutions taking action to limit global warming to 1.5C, in line with the Paris Agreement.

While Covid-19 had prevented an ANZ team from visiting European financial capitals for two years, Mr Whelan said there had been no let-up in the continent’s determination to be a leader on environmental, social and governance issues.

Last month, the Prudential Regulation Authority – the equivalent of APRA in the UK – said a landmark stress test had found that climate risks would be a persistent, 10-15 per cent drag on the profitability of the country’s banks and insurers.

PRA chief executive Sam Woods said the forecast drag was a big number but looked “absorbable” for banks and insurers, with no direct impact on their solvency.

Mr Whelan said he hadn’t found the figure surprising, as stress tests, by definition, assumed a stressful environment.

“Also the quality of the data in the portfolios is variable, so there’s a significant focus on cleaning that up and getting it right,” he said.

“In the UK they measure the output of carbon in households, but we don’t have that here.

“So this is all in its infancy, and as the banks and governments get better in terms of what they need and what they want, the measurement of that will become significantly cleaner, and then the response will improve.”

While investment in data was a big theme to understand portfolio risk, the other was the higher level of interest by investors in pragmatic steps taken by corporations to make the required transition.

“Because the disclosures are not standardised globally, and banks are at various stages of being able to drill into this data to get a clear picture, you’re also starting to see pragmatic action from corporates to move into that transition space,” Mr Whelan said.

ANZ was the first of the four major banks to concentrate on its top-100 emitters and engage with them to make sure they had viable transition plans to achieve net-zero emissions by 2050.

With the engagement project now complete, Mr Whelan said 2-3 companies had been “substituted” into the top-100, as the same number had pursued other banking relationships.

The next big leap in the climate-change challenge, he predicted, was in the reliability and comparability of data.

“We’re in a whole new dynamic here and this isn’t going away,” the institutional boss said.
“There’s plenty of opportunity and the outcome should be really good for the climate.

“I think there’s also money to be made in the meantime, although there will be risks associated with it, but the big companies and regulators are pretty committed to getting it right.”