“We need a target and we need a plan and the plan’s got to mobilize capital. We do need this plan for security,” Mr King said.
Westpac said on Wednesday it had joined the United Nations’ Net Zero Banking Alliance, pledging to reduce its scope 1, 2 and 3 absolute financed emissions in oil and gas by 23 per cent by 2030, compared with 2021.
In a move to tighten new lending standards, the bank said it would “only consider directly financing new greenfield oil and gas projects that are in accordance with the International Energy Agency’s Net Zero by 2050 scenario, or where the Australian or New Zealand government or regulator determines that supply from the asset is necessary for national energy security.”
The Investor Group on Climate Change welcomed Westpac’s commitment as a strong start, noting that companies should align to credible projections such as the IEA’s net zero scenario. “And investors will be looking closely at how robustly those benchmarks are being applied, the metrics, and what exceptions apply,” said IGCC director of corporate engagement Laura Hillis.
“Expanding and extending the oil and gas sectors is not consistent with 1.5 degrees pathways, so investors will welcome banks’ plans to move away from lending to those projects.”
The Sydney-based bank has followed National Australia Bank in making more concrete commitments around its financed emissions to the oil and gas sector, after NAB put in place a $US2.4 billion cap on lending.
Mr King said releasing “clear markers” for what the bank would finance would help customers make the transition.
“Across Australia, we now have stronger alignment and momentum on climate action in all states, and I am optimistic that great progress will be achieved with governments, industry, business and the community all working together,” Mr King said.
Westpac will give its existing oil and gas customers until 2025 to put in place “credible” transition plansagreeing to continue corporate lending and work with customers to put these plans in place.
The bank also defined the emissions intensity for power generation, saying 79 per cent of its lending to the sector was directed at renewable energy. Westpac included the cement production industry in its first round of targets because of the emissions intensity of the manufacturing process.
“Our target is designed to allow financing for the sector to continue while the sector transitions to new technologies to reduce the release of carbon dioxide in the manufacturing process,” Westpac said.
Westpac said it would publish its full net zero transition plan within 12 months of setting targets. Anthony Miller, Westpac’s head of institutional banking, said the steel value chain was the next consideration.
“Our intention is to release targets progressively as we do the work that needs to be done,” Mr Miller said, listing property, agriculture, transport and other components within the manufacturing supply chain as the next in line.
“The whole approach is to make sure we’ve done that work. The priority under the NZBA [Net Zero Banking Alliance] is you must focus on the most emissions-intensive industries first,” Mr Miller said.