“The massive 4 banks are engaged in a monumental façade, so long as they proceed undermining a secure local weather by funnelling billions to firms steaming forward with extra coal, oil and fuel,” mentioned Kyle Robertson, senior banks analyst at Market Forces and creator of the report.
Among the offers partially funded by Australia’s largest banks embrace the Japanese JERA World Markets’ liquefied pure fuel (LNG) enterprise. In October 2023, ANZ loaned AU$125 million (US$84.2 million), whereas Westpac loaned AU$101 million (US$68 million) as half of a bigger credit score deal to the vitality dealer, which specialises in LNG, coal and freight.
JERA’s portfolio features a 12.5 per cent stake in Santos’ Barossa fuel challenge, a 15.1 per cent stake in Woodside’s Scarborough fuel subject off the coast of northwestern Australia, in addition to over 1 / 4 of Freeport’s LNG challenge in Texas, famous the report.
Moreover, JERA has been recognized as a significant participant within the Japan-led fossil fuel growth in Asia and is concerned within the large fossil gasoline buildout plans in Bangladesh’s Chattogram area, which is dwelling to the nation’s final rainforest.
These tasks will launch 1.3 billion tonnes of carbon dioxide equal (CO2e) if accomplished, cancelling out any features made below Japan’s 2030 emissions discount targets greater than two occasions over, in line with evaluation by Fossil Free Chattogram, an initiative below Market Forces.
Fossil fuels proceed to kind the majority of the vitality combine in Asia Pacific, with thermal coal remaining one of many most worthwhile commodities to commerce regardless of sub-optimal financial institution funding and more and more reputational and stranded asset danger.
Backdoor financing
2023 marked the primary 12 months that not one of the massive 4 banks participated in a deal explicitly for a brand new or expanded fossil gasoline challenge. Nonetheless, all have continued to pump billions by means of “common company finance” offers to pollutive vitality firms, the report discovered.
Whereas challenge finance gives direct loans to fund the event of a definite revenue-generating challenge, common debt financing can be utilized for varied functions, akin to supporting budgetary wants or sustaining a stage of liquidity for investments.
“The banks have admitted that after they present common company finance to an organization, they typically don’t know what it’s spent on,” mentioned Robertson.
This primarily gives “backdoor financing choices” for firms pursuing new and expanded coal, oil and fuel developments, the report highlighted.
Final 12 months, 98 per cent of the banks’ fossil gasoline lending was below company financing phrases, with the remaining 2 per cent going to current fossil gasoline tasks slightly than new ones.
2023 noticed a marked decline in challenge lending by Australia’s greatest 4 banks because the Paris Settlement, in favour of general-purpose company lending. Picture: Market Forces
“It’s very regarding that common lending can assist an organization to pursue fossil gasoline growth plans that are harming the local weather,” Robertson added.
As an illustration, in November 2023, all 4 banks participated in a AU$1.25 billion (US$0.84 billion) syndicated mortgage to APA Group, Australia’s main vitality infrastructure enterprise with belongings in fuel, electrical energy, photo voltaic and wind.
A part of this mortgage can be used for “common company functions” and doesn’t must be repaid in full for an additional decade.
The report has subsequently raised considerations that these funds might feed large local weather air pollution from the Beetaloo fuel basin challenge in Australia’s Northern Territory, after the APA Group signed preliminary agreements with the main builders of the shale fuel extraction challenge final 12 months.
The 4 banks have additionally raised AU$2.2 billion (US$1.49 billion) for the fossil gasoline trade by means of the bond market in 2023, inclusive of AU$1.4 billion (US$0.95 billion) for firms with growth plans.
The findings mirror broader international tendencies, the place bond issuance has doubled as a supply of funding for vitality firms previously decade to interchange declining challenge finance, in line with non-governmental analysis and marketing campaign organisation Reclaim Finance.
“Company bonds are a essential and rising supply of finance for coal, oil and fuel firms. By arranging bonds for [these] firms with growth plans, banks are taking part in an energetic position in funding actions that are elevating financial dangers and are utterly out of step with the worldwide local weather targets of the Paris Settlement,” Robertson mentioned.
He added that whereas the large 4 banks have made sure exclusions on offering challenge finance for some fossil gasoline growth tasks, it’s “scandalous” that they proceed to lend or organize bonds for a similar firms.
In a assertion launched by the World Local weather Analysis Programme, scientists worldwide have known as for an entire phase-out of coal by 2050, and halving using oil and fuel each decade to restrict international warming to 1.5°C this century.
Nonetheless, the Australian authorities has lately expressed intent to discover new sources of fuel even because the nation transitions to web zero emissions. That is to make sure that the inhabitants’s vitality wants could be met, amid considerations that potential demand will outstrip provide by 2030, it mentioned in its Future Gasoline Technique report launched in Might.
Robertson highlighted that whereas the transition to a low-carbon economic system has advanced challenges, Australian banks can do their half to finance a speedy and simply transition.
“However they will’t try this whereas they’re nonetheless funding their coal, oil and fuel shoppers which haven’t any demonstrated intention of transitioning in step with international local weather targets,” he mentioned.
