Friday, July 1 2022

Moe, located in the Latrobe Valley in the Australian state of Victoria, has long been associated with fossil fuels. The area is rich in brown coal, and Moe is home not only to the miners who mine it, but also to the State Electricity Commission workers who burn it at nearby power plants.

The resulting greenhouse gas emissions mean the region is a large contributor to Australia’s overall carbon footprint – and therefore gearing up for the country’s energy transition. Power stations such as AGL’s giant Loy Yang plant, east of Moe, appear to be on borrowed time as the country charts a path to net zero by 2050. Even AGL’s future itself – and other major Australian energy suppliers – can be defined by those who want a faster transition.

And one of those emissions evangelists is another key player in Moe’s economy: Bank Australia, which has its customer service department in the city. It is one of the largest non-energy employers and has set an ambitious goal of achieving net zero emissions by 2035, including across its entire loan portfolio. Bank Australia is also progressing. Of the companies on the FT’s new Asia-Pacific Climate Leaders list – compiled with Nikkei Asia and data provider Statista – it has cut its Scope 1 and 2 emissions the most relative to revenue. Scope 1 and 2 emissions come respectively from a company’s own activities and from the energy it purchases.

Damien Walsh, chief executive of Bank Australia, said having staff and customers in the Latrobe region helped reinforce his decision to push hard to drive the country to net zero.

“Part of our role is to support the transition from the coal-fired energy economy,” he says. “We are growing in this region by attracting customers who want to be part of this change.”

Gone with the wind ? : Steam rises from the Loy Yang cooling towers. New Australian Prime Minister Anthony Albanese has promised to cut carbon emissions © Bloomberg

The bank traces its roots to the mid-1950s when it was founded as a credit union for the government’s scientific research department. It then absorbed more than 70 similar organizations – including the SEC Credit Union – before becoming a bank in 2011 and renaming itself Bank Australia in 2015.

Walsh says he took his climate stance in response to his customers, each of whom – since the bank has retained its cooperative spirit – has the right to vote at the annual general meeting. They made it clear that climate change was a top priority “by leaps and bounds,” Walsh says.

Bank Australia has gone carbon neutral by 2011, a goal it achieved after buying a conservation reserve in western Victoria. This has helped the bank offset the environmental impact of the new buildings it has financed. Eight years later, it has shifted all of its own energy supplies to renewable sources.

The approach has paid off in terms of attracting customers: it currently has 183,000, with a growth rate that has doubled since the bank launched a “clean money” investment framework in 2019, according to the Impact Director Sasha Courville. The initiative diverts investment away from fossil fuels, the transportation of live animals and weapons, and into areas such as renewable energy.

The transition from fossil fuels has become a topical issue across Australia, which remains one of the world’s largest coal and gas exporters and has suffered a series of climate-related disasters including bushfires and floods. Climate activists were quick to criticize the country’s ‘big four’ banks – ANZ, Commonwealth Bank, NAB and Westpac – for continuing to fund fossil fuel projects (they are on the list of climate leaders as so-called “funded shows” fall outside scopes 1 and 2.)

The strength of sentiment was demonstrated last month at a banking summit in Sydney hosted by the Australian Financial Review business journal. A 15-year-old schoolboy, prompted to protest after witnessing a cyclone that swept through Western Australia last year, confronted the chief executives of the Commonwealth and NAB and demanded they stop funding the fossil fuel industry.

The chief executives defended their case, with the Commonwealth’s Matt Comyn saying the bank’s policies were aligned with the Paris Agreement on climate change and that fossil fuels made up just 2% of the bank’s balance sheet.

But, while banks might try to frame fossil fuel financing as just a small part of their business, Dan Gocher, director of climate and environment at the Australasian Center for Corporate Accountability, a shareholder advocacy organization , says, “They’re coming out with a lot of net zero statements, but it doesn’t have an immediate impact or stop the big expansion of fossil fuel projects.

Gocher adds that most major banks remain “passive” in their approach to climate change. “It’s business as usual for banks not making the tough decisions.”

The banks, however, enjoy the support of the Australian Prudential Regulation Authority, the country’s financial regulator. He argues that it is important for Australian financial institutions to support fossil fuel companies as they transition from ‘brown’ to ‘green’ energy sources.

For its part, Bank Australia argues that reaching net zero goes beyond “own money” funding and into the core of its mortgage portfolio, which accounts for 84% of its lending.

“Customer [property] ownership represents the vast majority of (our) shows,” says Courville. The bank says 23% of Australia’s emissions come from buildings, half of them from homes. It therefore offers discounted loans to people who buy homes with solar panels, double glazing or insulation, arguing that loan policies can help make residential energy use more efficient.

Gocher adds that some major banks have launched products for purchasing solar power and electric vehicles, which have proven successful but are “piecemeal” without government support. He notes that last month’s change of government – with new Prime Minister Anthony Albanese promising a 43% reduction in emissions from 2005 levels by 2030 – could help push these initiatives further.

Walsh says Bank Australia may risk driving the net zero crossing due to its small size, but the whole industry needs to move faster. “We can’t do this alone,” he says.

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