Climate Energy Finance (CEF) has released a report that reveals that only 7 per cent of the “big four” banks’ collective sustainable finance target (SFT) of $385 billion by 2030 is being directed to financing renewable energy and hard-to-abate industries.
According to the report, the majority of their climate-related capital – between 44 and 72 per cent – is being invested in “green buildings” that only meet the minimum energy efficiency regulations.
The findings demonstrate the gap in the banks’ financing of emissions reduction in key sectors including energy, transport, and hard-to-abate industries (such as steel, cement, and petrochemicals).
CEF finance analyst and author of the analysis, Nishtha Aggarwal, says the analysis shows the banks need to actively reorient their lending if they are to align their climate rhetoric with their capital flows.
“Trumpeting climate action based on … financing minimally green-rated buildings is not enough, and leaves them open to accusation of greenwashing,” says Aggarwal.
“The banks should be using their firepower to advocate for more ambitious and coordinated policy, regulatory and investment settings that reflect and enable our national climate and sustainable economic growth goals, demonstrating leadership in Australia’s economic transformation to a zero-carbon economy.”
By the numbers
According to the findings, CBA’s current allocation under its $70 billion SFT by 2030 boasts the worst ratio of renewable energy to green building financing. The company is investing around $8 into minimum regulatory-grade buildings for every dollar it invests in renewables.
Westpac last year achieved $13 billion in total committed exposure (TCE), increasing its balance sheet growth ambition in climate solutions from $15 billion to $55 billion in TCE by 2030, plus $40 billion in bond facilitation. A higher proportion of its financing went towards renewable energy and low-carbon transport than the other banks.
NAB invested almost 50 per cent of its $70 billion SFT allocation into minimum-standard green buildings, with little transparency in other decarbonisation sectors. The analysts were unable to discern the bank’s allocation to renewables, transport, or hard-to-abate sectors and concluded NAB needs to provide more transparency on its contribution to climate change mitigation.
Overall, ANZ committed the largest sum – a cumulative $150 billion – to sustainable finance this decade. However, the report claims its “contribution to real world outcomes is largely opaque with a combined 64 per cent allocation towards instruments such as sustainability-linked and facilitative finance”.
Time to invest in the future
CEF Director Tim Buckley says Australia’s ability to achieve its national renewables and emissions reduction targets depends on whether it can mobilise capital at speed and scale towards the sectors that shift the dial the most.
“The big four banks should be key drivers of this mobilisation,” he believes. “[The banks] must expand their commitment to and capabilities in executing long-duration clean energy infrastructure deals, and rapidly increase their share of financing in future-facing sectors, such as value-added critical minerals key to global energy transition.
“This goes hand in hand with the imperative to commit to enabling a science-aligned progressive fossil fuel phase-out across their financed emissions exposures.”
The report highlights that the four banks will have a major role to play in ensuring Australia meets its 2030 energy targets. One of the key findings is that the banks need to shift their focus away from the emphasis on “green” buildings that don’t actually do more than meet minimum standards, and instead focus on decarbonising the energy system at utility scale and building future-facing sectors.
The full report is available to download here.