The Commonwealth Bank of Australia has made $6 billion worth of new loans to coal, oil and gas projects in the 20 months since committing to the Paris climate agreement, a new document has shown – more than four times the amount it loaned to renewable energy projects over that period.
In a letter delivered to the Australian Prudential and Regulatory Authority last week by Greenpeace Australia Pacific, the environmental NGO accuses CBA of having the “weakest climate policy” and dirtiest investment portfolio of any of Australia’s Big Four banks, and exposing its shareholders to reputational and financial risk.
The letter was submitted to APRA in contribution to the Authority’s independent inquiry into the bank’s governance, culture and accountability frameworks and practices, which it has been conducting since August.
In it, Greenpeace says it holds “legitimate and serious concerns” about the bank’s performance on climate change, which not only lags behind its Australian peers, but “compares unfavourably” to the majority of other financial institutions globally.
The NGO notes that CBA, since committing to the Paris climate target in 2015, has “not done anything to meet this objective,” but rather, according to Market Forces data, has made $6 billion worth of new loans to fossil fuel projects.
Of particular concern to Greenpeace – which until recently had engaged directly with the bank on the development of its climate policies – is CBA’s response to both the reputational risk of and the financial risk that its poor climate record, and continued investment in fossil fuels, exposes it to.
“The organisational structure, governance framework, and culture of the CBA appear to be holding back the bank from making sound risk management decision on lending to the fossil fuel sector,” Greenpeace says.
“CBA has been very slow to respond to the repetitional risk associated with a failure to act on climate change,” the letter says, adding that its Climate Policy Position Statement is “so weak that it has actually caused further reputational harm to the bank.”
“If reputational risk is a material financial risk, as the bank itself acknowledges, then it naturally follows that where the bank is aware of its poor image among a civil society sector, then it ought to disclose that risk in compliance with its… obligations.”
As the letter notes, the Commonwealth Bank has already run into legal trouble over its weak climate policy, in a case launched in August on behalf of CBA shareholders by Environmental Justice Australia, arguing that it had not adequately informed investors of climate risk.
And it warns that “further legal action” is foreseeable, with CBA “certainly leaving plenty of scope for shareholders to consider such action.”
The letter recommends that APRA “should enourage” CBA to engage with the environmental sector, academics and other experts to develop a climate policy that will meet its commitments under the Paris Agreement.
It also suggests that banks should link performance on climate change to remuneration at both the board and executive levels.
Finally, it says, “financial institutions should not commence new binding financial relationships to high-risk sectors such as coal, oil and gas until they have finalised a strategy consistent with the goals of the Paris Agreement,” including to phase out fossil fuels by 2030 to avert dangerous climate change.
The letter comes as Medibank – one of Australia’s biggest health insurers – announced it would divest tens of millions of dollars from fossil fuels due to the ‘health effects of climate change.’
The decision was announced on Monday in an ASX statement in advance of the Medibank AGM, with chairwoman Elizabeth Alexander stating “Medibank acknowledges the science of climate change and the impacts on human health”.
“As the global economy makes the transition to low-carbon emitting energy we believe it is important that our investment portfolio reflects this.
“As a result we will be transitioning to low carbon investments in our international investment portfolio within the next 12 months. We are also committed to exploring a similar approach within our domestic equity portfolio.”
In the banking sector, Greenpeace notes, ANZ has “indicated” it will no longer bankroll “conventional” coal power plants; and Westpac has limited financing of new thermal coal plant.