ANZ Bank will continue to lend to oil and gas companies so long as they have “Paris aligned” business plans under its updated climate change lending policy published on Friday.
ANZ, the biggest lender to fossil fuels among the major banks, gave its existing oil and gas customers four years – until 2025 – to satisfy the bank about their transition plans. Activists quickly labelled the new policy as inadequate to prevent the world from overheating.
The policy is good news for oil and gas companies such as Woodside Petroleum – which this week committed to the $16.5 billion Scarborough LNG project off Western Australia – after the United Nations climate conference in Glasgow ramped up the world’s ambition to cut carbon emissions. Woodside is an existing customer of ANZ, which also has New Hope and Santos on its books.
ANZ didn’t comment on specific projects in an ESG briefing on Friday, but CEO Shayne Elliott said ANZ wanted to fund the energy transition and funding for resource projects would be considered in light of the overall moves to cut emissions over the next three decades.
While ANZ will apply a stricter assessment to new oil and gas projects, Mr Elliott said it was possible loans to various CO2 emitting customers could go up in the short-term, suggesting the bank is willing to support gas as a fuel to transition the global economy to a cleaner energy future, in line with the government’s thinking.
“Trillions of dollars and investment is needed for the world to transition to net zero by 2050, and banks have a key role, and a significant opportunity, in arranging, directing and distributing the finance advanced,” Mr Elliott said.
“We are embracing this, and believe we are well-placed to shape and support the required transition.”
The ANZ position comes even though the International Energy Agency said there is no room for new fossil fuel supply projects if the world is to achieve net-zero emissions by 2050.
ANZ cut lending to expansionary fossil fuel projects by 37 per cent to $225 million in 2020 compared to 2019.
Market Forces, an activist group that has filed a protest resolution at ANZ’s annual general meeting in December, criticised the new ANZ policy for failing to rule out lending to new fossil fuel projects, which it considers should be the standard for all teh major banks.
Market Forces said ANZ’s interest in energy customer transition plans had been cast as an expectation rather than requirement and “it is entirely unclear what ANZ expects of these plans and strategies in order to justify continued or restricted funding.”
Another environmental activist group, 350.org said the new policy “fails to adequately meet their own commitment to net zero emissions by 2050”.
Unlike National Australia Bank, ANZ has not introduced a cap on overall lending top the oil and gas sector, which Mr Elliott said could result in the “wrong outcomes”.
NAB said earlier this month it had capped oil and gas loans at $US2.4 billion ($3.2 billion), just above the current level, which will allow it to keep lending as existing financing rolls off. NAB also said it was comfortable supporting greenfield gas extraction in Australia that “plays a role in underpinning national energy security”.
Mr Elliott said caps were simple and ANZ considered one but asked, “are we just trying to look good or are we actually trying to have an impact? We are trying to have an impact on lower emissions and our view is we should give more finance to those companies that are actually driving global lower emissions for the plane not moving them around.”
ANZ provides more funding for big projects than any of the other major banks, and has been the key domestic financier of the Australian resource industry for decades.
To hit the Paris goals, Mr Elliott said the bank “may end up increasing exposure, it may mean the direct emissions we count from our customers could actually go up”.
It will push customers to reduce the intensity of emissions to guide the economy towards net zero by 2050, via new “intensity reduction pathways”, and the briefing on Friday has provided detail on these for the commercial property and electricity generation sectors, with oil and gas to follow.
For all energy customers, ANZ said it wanted to see customers develop “specific, time bound, public transition plans and diversification strategies”. New customers would need to satisfy the bank of their Paris aligned plans before funding is provided, while existing customers have until 2025.
ANZ said energy customers should commit to and disclose “Paris-aligned” business plans and report “transparently” on climate risk and alignment to Paris goals.
It said customers in the oil and gas sector should be planning on capturing and storing methane in line with the ‘methane guiding principles’.
It wants to see oil and gas customers measure and disclose Scope 3 emissions from supply and value chains.