NAB to stop funding new coal projects

National Australia Bank will not finance new thermal coal mine developments.

NAB’s head of corporate and institutional banking, Mike Baird.

National Australia Bank will not finance new thermal coal mine developments under a policy that restricts lending to ­existing ­clients and projects that are ­already operating.

In a hardening of policy at the country’s leading business bank, NAB is set to announce that it will only reconsider if carbon ­reduction technologies such as carbon capture and storage prove commercially viable.

But the policy, to be unveiled by chairman Ken Henry at the annual shareholders meeting ­tomorrow, will leave open the prospect of financing coal-fired generation in a move the bank says recognises the fuel’s continuing role in Australia’s energy mix.

NAB’s head of corporate and institutional banking, Mike Baird, said the bank was not walking away from an industry that was a major contributor to the NSW economy and would continue to support clients who wanted to buy or expand existing mines.

“We believe that coal will be a big part of the energy mix for decades to come,’’ Mr Baird, the former NSW premier, told The Australian. “But without emerging technologies that aren’t commercial being commercialised then greenfields thermal (coal mines) is something that we won’t be doing.”

The new policy emerged as NAB and the Commonwealth Bank were given a “D” in a major study that found Chinese banks had led a three-year $630 billion financing boom in coal-fired power stations. Australian energy companies have resisted pressure from the federal government to extend the life of existing coal plants or invest in new ones. AGL Energy chief executive Andy Vesey told investors yesterday that a new plant would be a risky proposition.

“We do not believe that any private capital will invest in coal plants,” he said.

“Someone may say they want to, I don’t believe they will. Government may say they will ... but it is a pretty risky proposition.”

Australia’s major banks have faced growing pressure from protesters to end support for coalmining, as well as demands from regulators to report on and ­address climate risks to their business. All of the banks have ruled out financing the Carmichael mine proposed for the Galilee Basin, while the newly re-elected Labor government in Queensland has moved to block an application by India’s Adani for a $1bn loan from the Northern Australia Infrastructure Fund to support the mine.

But the banks continue to have varied policies on coal developments, with Greenpeace protesters dumping bags of coal outside CBA’s head office in October after it refused to rule out lending to new mine developments.

Westpac released a policy this year that effectively ruled out backing Adani by saying it would not support mines that opened new coal basins — as Carmichael would the Galilee Basin — and ­effectively restricting lending to less polluting black coal projects.

NAB said lending for coalmining fell from 11 per cent of its ­resource exposure to 5 per cent, or about $625 million, in the past two years. Its exposure to coal-fired generation fell from 19 per cent to 9 per cent since 2014.

Lending to wind, hydro and other renewable energy sources has increased by almost 50 per cent since 2014.

NAB is set to tap the market for investors seeking exposure to loans for wind and solar farms, with a new fund of up to $200m.

Mr Baird said the new policy would “formalise” what had become practice at the bank in recent years.

“We strongly believe that we have got a responsibility to play a role in terms of the transition in the energy mix to a lower carbon economy,” he said.

“But at the same time we want to be very clear that we are backing our existing clients and our existing assets.”

Mr Baird rejected claims that the policy would hurt jobs growth in regional NSW. “We continue to support the mining industry, our existing customers with their ­existing assets,” he said. “There is a lot of jobs connected to that. We acknowledge that, support that and will continue to do so.”

Additional reporting: Matt Chambers