That may be pretty unsurprising,but perhaps the more interesting part of the report was that it also looked at how banks are likely to respond to climate risks.
In a nutshell,APRA said the lenders would cut their exposure to these riskier loans. This could include cutting available credit to mortgage customers in parts of Northern Australia,or it could mean slashing lending to the high-polluting industries.
And that takes us back to the environmental pressure that is likely to confront NAB,ANZ and Westpac over the next two weeks (the Commonwealth Bank held its annual meeting in October).
Most of the shareholder angst is focused on corporate loans to big fossil fuel companies and other emitters. In the last few years,the banks have all made the fairly easy decision to slash their lending to coal miners. But they are now in trickier territory of explaining how they’ll finance the “transition” to greener fuels,and how they’ll deal with sectors that are “hard to abate” but still essential,such as manufacturing steel or cement.
This year,all big four banks have outlined more detailed plans for how they plan to pull this off. All are leaving the door open to financing gas in the short term,given its role as a transition fuel,while also promising to get much tougher in their assessments of big polluters.
ANZ - the nation’s biggest lender to large corporations - last week vowed to dump customers by 2025 if they failed to produce credible carbon reduction plans.
To their critics in the environmental movement,it is simply a case of the banks moving too slowly.
But some big investors counter that this year’s energy crisis,and the shortages of fossil fuels such as gas,have complicated the picture.
Certainly,the results of some past climate change resolutions at bank AGMs suggest investor enthusiasm for pushing the banks hard on climate action may have waned. In 2020,for example,a very solid 28.7 per cent of ANZ shareholders voted in favour of an activist resolution for greater disclosure of the bank’s climate planning. A resolution calling for more disclosure planning at CBA also got support from 14.4 per of shareholders.
This year,however,only 5.7 per cent of CBA shareholders backed a resolution from environmental group Market Forces calling for CBA to show how its funding wouldn’t be used to expand fossil fuels. NAB,ANZ and Westpac all face the same resolution in the next fortnight.
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Market Forces executive director Julien Vincent says he would not be surprised if the climate resolutions at NAB,Westpac and ANZ this year also attract less investor support than last year,as happened with CBA.
The way he sees it,this year’s resolutions are demanding banks back up their generalised commitments on climate change with real action. He also believes the world of institutional investment was full of “hypocrisy and cowardice.”
“The closer we get towards the stuff that matters,the less investors want to challenge the companies they actually own,” Vincent says.
Bankers respond that if even if they were to cut fossil lending more aggressively,some other financier (with weaker green credentials) would simply fill the gap. Much like many super funds,bankers argue they can do more to cut emissions if they are invested the big polluters.
Increasingly,however,this “engagement” must also involve tough decisions by bankers,such as refusing credit to heavy emitters that don’t have credible plans for cutting their pollution.
Ross Gittins is on leave.
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