Australian banking giant becomes latest major investor to tighten coal lending rules with 2030 target for ending investment
Australian banking giant Westpac has become the latest in a string of major investors to signal it is to sever ties with the thermal coal mining sector, pledging to end investment in the industry by 2030.
In an update to its climate strategy released today, the company said it would support existing thermal coal customers, but would do so alongside "a commitment to reduce our exposure to zero by 2030".
As such, the bank has now committed to not establish relationships with new thermal coal customers; limit support for thermal coal mines or projects to existing basins; and maintain strict quality criteria for any lending.
It added that it would continue to provide financing for metallurgical coal production, but would do so while seeking to "support technological developments and industry initiatives that reduce the dependence of the steel industry on coal".
It also stressed that while it would continue to invest in carbon intensive sectors, it would aim to do so in line with the goals of the Paris Agreement. "We will continue to assess the role of oil and gas in the transition to a low carbon economy and to develop Paris-aligned financing strategies and portfolio targets for emissions intensive sectors, working with our customers," the report states.
The update came as Westpac confirmed it has decided to not pay an interim dividend to shareholders, after posting a 70 per cent slump in cash earnings to $993m for the six months ended 31 March, largely attributed to the disruption caused by the coronavirus pandemic.
The revamped climate strategy also reiterated the bank's commitment to support a transition to a net zero emissions economy by 2050 and help deliver on the Paris Agreement and the UN Sustainable Development Goals.
The promise of a thermal coal investment phase out was welcomed by Julien Vincent, executive director at campaign group Market Forces.
"Westpac's policy is another nail in the coffin of the thermal coal industry and a stark warning to a federal government trying to leverage the COVID-19 pandemic to give the fossil fuel industry a leg up," he said. "This plan shows it won't be happening with Westpac's cooperation.
"Last year, Commonwealth Bank was the first [Australian bank] to commit to be out of thermal coal by 2030, along with all three of our general insurers. Now, anyone trying to operate a coal mine or power station in Australia by the end of this decade will need to do it without Westpac as well."
However, the group also urged Westpac to now fully translate its new policies through to its investment activities.
The bank said it was aiming to provide $3.5bn of new lending to climate change solutions over the next three years and had cut its overall exposure to climate polluting industries, including longstanding investments, by 16 per cent last year.
But Market Forces noted that since 2016 Westpac has loaned $5.4bn to coal, oil and gas projects including $846m to projects that expand the scale of the fossil fuel industry. Moreover, since committing to the Paris Agreement, the bank has loaned 2.7 times as much money to fossil fuels as to renewable energy, according to campaigners.
However, Vincent said there was now growing evidence that more and more financial institutions were willing to drastically reduce their exposure to fossil fuels.
"Westpac's policy comes out as we contemplate what sort of future we want for our economy," he said. "With the frailties of the coal, oil and gas sectors laid bare by the economic impacts of COVID-19, and the horror summer of bushfires still fresh in our minds, the time has come to move on from polluting fossil fuels once and for all."
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