Activist investor groups have attacked new climate targets revealed by Westpac, raising concerns they do not do enough to curb new coal and gas projects that contribute to global heating.
On Wednesday the bank announced it would toughen its rules on financing fossil fuel projects by ruling out lending to companies that derive 5% or more of their revenue directly from thermal coal mining, down from its previous cut-off of 25%.
Westpac also said it would only finance new oil and gas projects if they had been committed by May last year or were “necessary for national energy security”. And it decreased the amount of carbon emissions allowed for power generation and cement production projects to which it lends.
The moves were aligned with the internationally agreed Paris target of limiting heating to 1.5C “where underpinning data and methodologies were sufficient” and were based on International Energy Agency scenarios, the bank said.
It said its targets would also be reviewed based on the latest science.
However, Harriet Kater, climate lead at the Australasian Centre for Corporate Responsibility, said Westpac’s approach to oil and gas extraction projects was concerning.
“It suggests that greenfield oil and gas projects can be compatible with the IEA Net Zero Scenario and adds an additional national security loophole, when we know that every oil and gas company is using the Ukraine crisis to justify further expansion,” she said.
“Westpac is also stating that existing oil and gas customers will require a credible transition plan by 2025. Considering the embarrassing state of transition plans across the sector, such as Woodside’s near total reliance on offsets, how does Westpac define what is credible?”
Julien Vincent, the executive director of environmental investment advocates Market Forces, accused the bank of hypocrisy.
“The bank wants you to think it’s no longer financing new thermal coal mining and even taking steps to limit oil and gas supply projects, in line with the International Energy Agency’s Net-Zero by 2050 scenario,” he said.
“However, Westpac is still bankrolling companies planning to build massive new coal and gas projects. This policy does nothing to change that.
“In recent years, Westpac has financed Whitehaven Coal, Woodside, and Santos, companies that have plans to spend billions of dollars on projects that will lock in more highly-polluting fossil fuels for decades to come.
“Even after today’s announcements, Westpac is giving itself licence to finance companies whose business strategies are consistent with the abject failure to meet climate goals of the Paris Agreement.”
Westpac said it lends about $220m to thermal coal businesses and about $2.4bn to oil and gas producers. It said it would reduce its lending to thermal coal to zero by 2030 and the exposure to oil and gas “has trended down over the past five years”.
Anthony Miller, the chief executive of Westpac’s institutional arm, which is responsible for lending to large customers, said setting emissions targets so that the bank reached net zero emissions was “complex and challenging”.
“Our approach has been to establish targets in sectors where we can set a 1.5 degree target where sufficient underpinning data exists, where we can rely upon industry guidelines,” he said.
“We want to be the transition partner of choice for our clients.
“It is critical that we can work with our clients on their commitments, and our approach is therefore to apply industry accepted scenarios, tools and methodologies for each sector.”
