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“This challenge was evident this year as the emissions intensity of our power generation portfolio increased due to short-term financing of some existing customers,” he said.
“They needed help to manage record high wholesale prices, requiring them to post collateral to margin accounts to cover these positions.”
The Melbourne-based bank on Friday set targets for four heavy emitting sectors: cement, steel, aluminium and oil and gas, adding to the commercial property and power generation goals set last year.
ANZ is keeping the faith on oil and gas. Louise Kennerley
ANZ has now joined the other big four banks in releasing a pathway to transition for the oil and gas sector, saying it would cut absolute emissions by 26 per cent by 2030 and to zero by 2050.
But it stopped short of setting caps or withdrawing from the sector, instead recognising the crucial role these big industries play in getting Australia to net zero.
“A variety of opportunities exist for the oil and gas sector to reduce emissions across the value chain,” ANZ said in its presentation.
“A priority for oil and gas companies is to minimise methane leaks through a focus on leak detection and repair. Over time we will weight our financing to customers with stronger emissions reduction targets and diversification strategies.”
But the move drew criticism from climate activists who want the banks to stop funding new oil and gas projects, as well as to define how they measure clients’ transition plans.
“ANZ did not elaborate on what constituted a good transition plan, stating that ‘a variety of opportunities exist for the oil and gas sector to reduce emissions across the value chain’, without setting clear goals clients would need to meet in order to access capital,” said Market Forces director Julien Vincent.
Last month ANZ said it had engaged its top 100 customers, finding that a third of them had upgraded transition plans since the last financial year.
On Friday, the bank said it would categorise customers according to Taskforce on Climate-related Financial Disclosure guidelines and make plans to allocate capital against their goals and targets.
But the sector is still waiting for the Australian Sustainable Finance Institute to implement a taxonomy that will guide capital allocation by setting clear and measurable targets for industry, to help avoid allegations of greenwashing. The taxonomy project has been sped up by the new government and is expected to be ready by 2025, with work to develop technical screening criteria to start in early 2023.
“The taxonomy work that ASFI is leading will provide clear and transparent definitions of activities that are aligned with a net zero transition across sectors, not just those that are already sustainable,” said ASFI chief executive Kristy Graham.
“This will help to bring credibility, rigour and comparability to reporting against targets like these and the climate outcomes they are achieving. Specific transition targets, and the proposed transition criteria in the taxonomy, recognise the whole of economy shift required to meet Australia’s climate goals.”
ANZ is the most significant provider of capital to the resources sector among the big four banks and was to explain its report to a group of about 30 investors on Friday. It is also expected to face questions from activists who want the banks to stop funding fossil fuels altogether.
National Australia Bank set a $US2.3 billion ($3.4 billion) cap on funding for new oil and gas, while Westpac Banking Corporation said it would stop financing any greenfields projects. Commonwealth Bank of Australia has not made any commitments to stop financing oil and gas and says, like ANZ, it is working to ensure a just transition.
ANZ’s move is expected to help boost Australia’s positioning as a hub for transition finance in Asia. Transition bonds are allocated to help brown or dirty industries become less brown, unlike “green” or “sustainable” bonds, which can only be marketed for activities classified as green.
The Climate Bonds Initiative in the United Kingdom says transition bonds currently make up 7 per cent of the sustainable debt market, but the proportion is expected to grow sharply.
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