Australia’s banks stop funding coal as trading partners decarbonise

The last of Australia’s Big Four banks has said it will stop financing thermal coal projects as the country’s big trading partners seek to cut emissions, in a move that will force the industry to turn to foreign lenders for new funds. ANZ Bank announced on Thursday it would cease lending to existing coal-fired plants and mines by 2030 in order to reduce the carbon footprint of its loan book. It said it would also immediately cease funding new projects, boost lending to the renewables sector and introduce emissions reduction goals for financing provided to its 100 largest customers. The move by Australia’s fourth-largest bank by market capitalisation follows similar steps by Commonwealth Bank of Australia and Westpac, which want to stop coal financing by 2030. National Australia Bank will cease thermal coal funding by 2035. That follows decisions by mining groups Rio Tinto and BHP to exit thermal coal in response to growing investor pressure over climate change. In recent weeks, Australia’s three biggest customers for thermal coal have announced plans to decarbonise their economies and achieve net zero emissions. South Korea and Japan want to do so by 2050 and China by 2060. Our policies won't be set in the United Kingdom, they won't be set in Brussels, they won't be set in any part of the world other than here Scott Morrison, Australian prime minister “This is good old fashioned risk management . . . [this week] we’ve seen announcements from some of our biggest coal markets, for example, like Japan. We just can’t sit and ignore that,” said Shayne Elliott, ANZ’s chief executive.Australia’s A$20bn a year thermal coal industry is under pressure due to Covid-19, with the price of the country’s high quality coal having dropped by about a quarter since January. But it also faces a more existential challenge due to global efforts to reduce greenhouse gas emissions as outlined in the Paris climate accord. Australia’s banks have begun reducing their exposure to thermal coal, with ANZ’s outstanding loans to the industry falling to A$500m in September, down from A$1.7bn in 2015. Suncorp and QBE, two large insurers, have also indicated they will not insure or finance new coal projects from 2030.Australian coal miners have increasingly sought overseas funding as a result. Whitehaven, which has a market capitalisation of A$1bn, has tapped Japanese and Chinese lenders for loans. Indian conglomerate Adani Group has said it will rely entirely on its own resources to fund the controversial Carmichael project in Queensland. ANZ’s pivot away from coal — the most polluting fossil fuel — sparked criticism from Australia’s conservative government. David Littleproud, Australia’s agriculture minister, advised customers on Thursday to avoid banks that “impose crippling new carbon targets” on Australian farming families and industries. Australia has not set a date to achieve net zero emissions. Scott Morrison, Australia’s prime minister, this week shrugged off a call by his UK counterpart Boris Johnson for Canberra to take “bold action” on climate change. “Australia will set our policies here. Our policies won't be set in the United Kingdom, they won't be set in Brussels, they won't be set in any part of the world other than here,” Mr Morrison told journalists. Dan Gocher, director of climate at the Australasian Centre for Corporate Responsibility, said the move by Australia’s banks was a symbolic moment for the fossil fuels industry and highlighted how the country’s government was becoming isolated from its trading partners and own business community.Twice weekly newsletter Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.