Big Banks

Our big banks are important. The have $2.2 trillion in assets, mainly loans which are equal to half as much again as Australia's gross domestic product (GDP).  Where they invest is a major influence on where the Australian economy is going.  So it matters to all of us what the banks do about climate change.  All of them lend extensively to fossil fuel business.

Big Bank campaign 2015 - resolutions lodged with ANZ

ACCR  updated our research on the big banks in September 2015.   We found that

  • as a result of the 2014 big bank campaign all banks improved their disclosure (see also here)
  • ANZ still appears to be the most exposed bank with the weakest climate change policies.

You can see our research update here.

ACCR, together with 100 plus shareholders from Market Forces, Ethinvest and Tas Ethical, have lodged resolutions to be debated at the ANZ AGM on 17 December 2015.

The resolutions have 3 parts asking ANZ to:

  • make it easier for shareholders to move resolutions
  • ask ANZ to provide more information about how much it is exposed to carbon-intensive industries
  • set public targets for reducing ANZ’s exposure to carbon intensive industries.

Big Bank campaign 2014

ACCR has had a successful 2014 campaign to force the big Australian banks to disclose how much carbon they finance. All 4 banks have improved their disclosure as a result.  For a summary of the campaign see this Crikey article or this summary by ACCR.

  • CBA has undertaken to disclose the carbon emissions initially from their lending to the energy sector and then all their lending. It disclosed more information about its fossil fuel mining lending in response to a question at the AGM.
  • NAB has disclosed how much of its lending to the mining sector is to fossil fuels.  NAB has also committed to facilitating collaboration with other Australian banks to disclose more.
  • Westpac has disclosed how much of its lending to the mining sector is to fossil fuels as well as the carbon intensity of its infrastructure and utilities portfolio.  It appears still to be the least carbon exposed of the big 4 banks and makes the most comprehensive disclosures.
  • ANZ has disclosed the emissions intensity of its power generation lending.

This additional information means shareholders can start comparing banks fossil fuel performance using facts not guesses.  Now that both Westpac and ANZ have disclosed the emissions intensity of their power generation portfolio shareholders can see that for this part of their portfolio Westpac has a significantly lower carbon intensity than ANZ. We expect other banks will be forced to move to more disclosure rapidly from sustained public, regulatory and shareholder pressure. 

This additional disclosure is a result of our report on the big banks, shareholder and community action.   The best disclosure so far is from Westpac, both before and after the  the 2014 AGM season.  NAB committed to increased disclosure, and to work with the other 3 big banks towards additional disclosure.

We asked questions at both the Westpac and NAB 2014 AGMs.

Our resolution about climate change disclosure at the Commonwealth Bank of Australia AGM lead to the chair of CBA saying that climate change was one of the two big issues facing CBA.  This is a long awaited acknowledgment by one of Australia's biggest banks that climate change is an issue.  Our resolution got 3.2% of the vote.

We lodged a resolution at the ANZ AGM where it forced the board to acknowledge carbon as an issue and improve disclosure.  Our resolution received 2.95% of the vote.

The Resolutions

The resolutions are based on our research into the carbon exposure of the big 4 banks. The resolutions are all similar and say

"That, each year at about the time of the release of the Annual Report, at reasonable cost and omitting any proprietary information, the Directors report to shareholders their assessment of the quantum of greenhouse gas emissions we are responsible for financing calculated, for example, in accordance with Greenhouse Gas (GHG) Protocol guidance."

Banks finance greenhouse gases thru there loans, direct investments, wealth management funds, insurance and superannuation.  The amount of greenhouse gases they finance is significantly bigger than that emitted by the banks operations.

A recent report says"Fossil industry is the subprime danger of this cycle'

The Climate Institute has just published a discussion paper, “Australia’s Financial System and Climate Risk”,  which identifies risks that the Australia’s financial system could be destabilised by both direct climate change impacts and secondary effects, such as a slump in demand for carbon-intensive exports.

Carbon Tracker found 60 to 80 per cent of oil, gas and coal reserves owned by listed companies cannot be burnt if agreed global emission targets are to be achieved.  This must be ‘unburnable carbon’ if the world is to have any hope of keeping average global temperature rise to 2 degrees.

As well the risk of 'unburnable carbon' renewable energy is getting more cost effective.  These two effects are leading to a perfect storm for fossil fuel investors.  You can read more in the Guardian or for an in depth view see the Stranded assets and the fossil fuel divestment campaign report from the University of Oxford. 

Shareholders in the big 4 banks - CBA, NAB,ANZ and Westpac- along with Australia’s over 11.5 million superannuation members whose funds almost certainly invest in the big 4 banks, have a right to know if their banks are invested in 'unburnable carbon', what the risks are and how their bank intends to manage them.

In the 2014 US proxy season 132 resolutions were filed with 118 US companies dealing with climate change issues. Resolutions requesting disclosure of financed emissions considered at the AGM’s of Bank of America and PNC financial attracted the support of roughly one quarter of shareholders voting. These resolutions are forcing companies to at last consider how they are adding to climate change and the risks for the company and the environment.

The resolutions are the first in Australia to focus on Climate Change and disclosure since a similar resolution to Woodside Petroleum in 2011.

Other issues with our big banks

Climate change is not the only issue where the big banks are not meeting some shareholders expectations. Land grabs by large companies in developing countries have pushed thousands of small farming and forest communities from their lands, leaving them homeless and hungry.  Oxfam has uncovered links between these companies and Australia’s big four banks.

ACCR is currently looking at NAB's political expenditure.

Climate Change Advocacy in the US & UK

Shareholders in USA and UK have been campaigning about climate change for years.

In January 2015 as a result of a long campaign, Shell has supported a shareholder resolution filed by a coalition of major investors about the risks associated with climate change.

Co-filers ShareAction and ClientEarth helped the Aiming for A coalition coordinate the filing of the resolution at Shell. The same group, which includes major investors, asset managers and insurers, has also filed a similar resolution with BP.

The resolutions call on BP and Shell to transparently:

  • Stress-test their business models against the requirement to limit global warming to 2ºC, as agreed by governments at the UN Climate Change Conference in 2010;
  • Reform their bonus systems so they no longer reward climate-harming activities
  • Commit to reduce emissions and invest in renewable energy.
  • Disclose how their public policy plans align with climate change mitigation and risk

ExxonMobil is the largest U.S. energy company.  For many years Exxon Mobil was a major funder of global warming denier groups. ICCR members filed resolutions requesting the company either cease such funding or publish the identity of beneficiaries and amounts provided. Eventually, when support reached over 25%, the company pledged to cease such funding.  

In 2014 as a result of shareholder resolution Exxon Mobil has agreed to publish a Carbon Asset Risk report on the Company website describing how it assesses the risk of stranded assets from climate change.  For more about this read here. Currently a group of Mobil Exxon shareholders is saying that profits should be returned to shareholders and not reinvested in more oil exploration

Other US energy companies have had similar campaigns.

In the USA, in 2014, 24% of Bank of America’s shareholders voted in favour of the bank reporting about their climate risk and many other financial institutions have agreed be more open to their shareholders on this issue.  In 2015, there are 87 USA shareholder resolutions about climate change – see http://www.ceres.org/investor-network/resolutions.  Together with the political and civil society actions on climate change, shareholders are making a difference.

 

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