Overseas pension funds managing hundreds of billions of dollars have thrown their support behind shareholder resolutions from environmental groups pushing for changes from Westpac and National Australia Bank at their annual meetings this week.
Westpac’s fossil fuel lending is likely to be a key topic of discussion at the bank’s annual meeting in Sydney on Thursday, after environmental group Market Forces put forward a resolution that it says would require the bank to prove how its fossil fuel financing, including to oil and gas businesses, aligns with global climate goals.
The resolution, co-filed by fund manager Australian Ethical, has backing from offshore funds including the New York City Pension Fund, Norwegian pension fund KLP, and the $US500 billion ($754 billion) fund for Californian public sector workers, Calpers,
On Friday, NAB is facing a different resolution over its financing of businesses allegedly involved in the clearing of natural forests, which was lodged by shareholders working with the Australian Conservation Foundation (ACF). Calpers and a €200 billion ($350 billion) Italian asset manager called Anima are backing that resolution.
The two resolutions, which are opposed by the banks’ boards, highlight the ongoing pressure on Australia’s banks over environmental issues, including the industry’s central role in the nation’s shift from fossil fuels to green energy.
Westpac has faced criticism from environmental critics, who argued earlier this year the bank had adopted a more lenient approach to fossil fuel emitters, after changes to its policies including shifting its global warming target from 1.5 degrees above pre-industrial levels to “well below 2 degrees.”
In response to the AGM resolution, Westpac’s chief sustainability officer Fiona Wild said the bank was supporting the transition to a net zero economy and fossil fuel loans were a small share of its total exposure.
She also noted the growing demand for energy and electricity.
“In the longer-term gas will play a decreasing role, but it is still needed in the energy transition, as outlined in the Government’s Future Gas Strategy and by the Australian Energy Market Operator,” she said. “Balancing the priority to decarbonise the economy with the need to maintain energy security and affordability will be critical in this transition.”
The bank said a preliminary assessment of relevant business customers found 9 per cent of them received a “D” rating on their transition plans, meaning they would be declined new finance.
But critics have accused the bank of watering down its climate position, with Market Forces senior bank analyst Morgan Pickett saying: “Westpac has betrayed its shareholders and customers by scrapping its science-based climate policy and replacing it with one so full of loopholes it looks like Swiss cheese.”
Australian Ethical argued Westpac’s changes meant the bank could continue financing companies engaged in fossil fuel expansion, contrary to previous commitments. “Westpac is no longer the climate frontrunner among the big four banks,” ethical stewardship lead at Australian Ethical, Amanda Richman, said.
Last year Westpac faced a similar shareholder resolution, which was knocked back but attracted support from 34 per cent of votes cast.
Another closely watched vote at Westpac’s AGM on Thursday will be the re-election of non-executive director, Peter Nash, after two proxy firms reportedly recommended shareholders oppose Nash’s re-election, pointing to his time on the board of ASX Limited, which has faced a series of setbacks lately. Westpac’s board has backed Nash’s re-election.
NAB’s annual meeting, to be held in Melbourne a day after Westpac’s, will not include a vote on climate change issues after Market Forces withdrew a resolution after the bank’s latest climate report was released.
In a new front for banks, however, NAB is facing a resolution that would require the bank to disclose how much it lends to customers involved in “deforestation,” which refers to when natural forests are lost because the land is converted to farming, tree plantations or there is severe and sustained degradation.
NAB’s board, which opposes the resolution, says the bank has improved its approach to investigating suspected illegal land clearing by customers, and it is developing how it deals with this risk, including by training bankers.
The ACF has previously said the expansion of the beef industry is the top driver of deforestation in the country – and NAB is the largest agribusiness bank in the country. Italy’s Anima and US-based Calpers have indicated they are voting in favour.
It is not clear if the resolutions will be backed by Australian super funds. Major funds AustralianSuper, Australian Retirement Trust and HESTA did not disclose their voting intentions before the meetings.
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Clancy Yeates is deputy business editor. He has covered banking and financial services, and was previously national business correspondent in the Canberra bureau.Connect via Twitter or email.
