National Australia Bank is putting its big emissions customers on notice that they will need to have climate transition plans in place in two years' time.
If those plans aren't ready by October 1, 2025, Australia's biggest business bank will be considering its options.
NAB will initially focus on major customers in the fossil fuel sector - power generators, oil and gas and metallurgical coal producers - seeking new or renewed corporate lending or project finance.
"Where we assess a customer transition plan would make it difficult for us to meet our stated sector decarbonisation targets on a portfolio basis, we will engage with the customer to review any areas of concern," it said in its 2023 Climate Report filed with the stock exchange on Thursday.
"If necessary, on application of new or renewed lending, we will consider contractual protections or reduce our exposure."
NAB acknowledged "considerable" capital was needed to help its customers decarbonise, and sees this as a significant opportunity.
The bank's diagnostic research shows all 100 of its biggest greenhouse gas-emitting customers acknowledge climate change as a business risk.
Some 67 per cent have set a goal to be net zero by 2050 or sooner.
Of its mining and associated trade customers, 30 per cent are integrating climate change impacts into their operational decision-making.
"The transition is accelerating and our customers are progressing with their transition plans", NAB chief climate officer Jacqueline Fox said in the report.
However, the activist group Market Forces said while the bank's transition plan requirement was important, the time frame was too long.
"It's a serious concern that NAB has left the door open to providing more finance to climate-wrecking fossil fuel companies, such as current clients Santos and Glencore, until October 2025," banks campaigner Kyle Robertson said.
The issue is set to be raised at NAB's annual general meeting on December 15, when shareholders could consider a resolution put up by a group of fellow investors asking whether the bank will apply the requirement to "all" fossil fuel companies.
"The company does not intend to apply this requirement to customers in the thermal sector because the company has set a target to reduce financed emissions for this sector to zero by 2030," NAB responded in its annual general meeting notice.
NAB also said it no longer had any corporate lending to thermal coal mining customers or project finance in respect of thermal coal mining assets.
