Westpac has vowed to avoid the financing of any new inefficient and high carbon emitting assets, and says it will focus instead on the development of clean energy solutions.
The pledge – the first to come from a major Australian bank – came in the annual report released on Monday that made a virtue of the bank’s focus on sustainability, using the words “sustainability matters” as the single feature on the cover of its shareholder document.
The bank’s newly drawn up position statement on the energy sector includes a framework that will apply to all finance activities – debt, financial markets, project finance and other services – relating to the energy sector. That includes all forms of power generation, distribution and transmission networks, and infrastructure and utilities associated with oil and gas production.
The key phrase is the one that commits the bank to “avoid involvement in transactions which support the establishment or long-term continuation of inefficient and high carbon emitting assets into the future.”
A spokesperson said that Westpac would honour its current commitments, but no new fossil fuel projects would be supported unless they adopted cleaner and less intensive generation, such as carbon capture and storage technology. Instead, the bank would focus on financing renewable energy, energy efficiency and clean technology, managing carbon risk and support research and policy development.
The bank has been a founding signatory to the Equator Principles, which broadly state that lending should avoid environmental harm, but this has been a lofty ambition that has been difficult to effect; as some might expect it to be.
Just drawing up these rules has taken longer than expected, particularly with the GFC, and the bank has been busily providing additional training for its project financing staff this year to ensure that these principles and their implications are fully understood.
Australian banks have come under increasing pressure from environmental groups such as Greenpeace to curb their lending to fossil fuels, with ANZ a recent target because of its higher exposure to fossil fuel energy. ANZ is also a signatory of the Equator Principles, although it has said it sees its role as “evolutionary” rather than “revolutionary.”
But the continued financing of high emitting assets has become such a problem for banks as they seek to manage various stakeholder expectations, and reputational risk, that the recent financing of for the refurbishment of Verve Energy’s Muja coal fired power plant in WA was only completed on condition that the identity of the lender remain confidential, which will make it doubly embarrassing should the banker be revealed. A Greenpeace spokesman said it would be interesting to see what the Westpac pledge meant in practice.
Westpac was one of several large companies that took a prominent role last Friday at a meeting convened by Senator Christine Milne at Parliament House, that amounted to a “call to arms” to counter the influence of those who would argue for a carbon price of minimum cost, scope and flexibility.
Milne managed to attract representatives of around 70 groups – including the likes of Westpac, Lend Lease, GE, Origin, AGL and a bevy of clean energy groups, as well as representatives from think tanks, universities, industry bodies and NGOs for the two hour meeting.
Milne is concerned that, now that a carbon price in on the table, the debate is being hijacked by the powerful vested interests that seek to dominate public debate – not to mention the round table advising the government – and who she suspects want a narrow pricing scheme with a minimal price and without complimentary measures.
She wants the vocal support from business and other groups to shift the debate from a focus on least-cost abatement to meet Australia’s short term unconditional 5 per cent target, to one of maximising the opportunities of a more ambitious longer term target, and that can lead to a change in Australia’s emissions profile.
The Greens are frustrated that emissions reduction targets are not on the agenda of the multi-party committee that Milne co-chairs. So, they are pushing for a carbon tax in the hope of guaranteeing a robust carbon price (mostly likely to be at least $20 a tonne) until such time as a higher target is agreed, and to ensure that there is sufficient flexibility in the scheme for it to be adjusted, as needs be, with scientific and international developments.
Rod Leaver, the head of Lend Lease’s Australian operations and possibly the most senior executive at the meeting, said the company wanted a carbon price to provide certainty and drive change. Borrowing a well-used phrase, he said the risk was not from “setting the bar too high and not achieving it, but in setting it too low and achieving it.”
