Climate Biz Matters
Join Climate Biz Matters co-hosts Paula Martinez and Antony Balmain to dig deep into the business opportunities and decisions shaping our climate, environment and communities. Climate Biz Matters is a Market Forces podcast bringing together perspectives from experts and community members working towards a more sustainable future.
Climate Biz Matters
How our banks are funding the climate crisis
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Australia’s biggest bank Commonwealth Bank has gone from worst to first of the big four in cutting funding to coal, oil and gas.
Macquarie has become one of the country’s biggest fossil fuel funders rather than aligning with the climate goals of the Paris Agreement.
In this episode of Climate Biz Matters we speak to Kyle Robertdson who’s the Research Director at Market Forces and Morgan Pickett, Market Forces’ Policy Analyst, who’ve both been at the forefront of efforts to have Australia’s biggest banks listen to customers, climate scientists and experts - and then take action.
We examine how positive change has been made possible and how we, as bank customers, can influence our financial institutions to do better for the climate.
Introduction
AntonyWelcome to Climate Busin Matters, a podcast by Market Forces coming to you from the lands of the Wurundjeri Woi-wurrung people of the Kulin Nation here in Narm - Melbourne, Australia. I'm Antony Balmain.
PaulaAnd I'm Paula Martinez. We explore the business opportunities and decisions shaping our climate, environment, and communities, bringing together perspectives from experts and community members working towards a more sustainable future.
AntonyWell, in this episode of Climate Biz Matters, we speak to , who's the research director at Market Forces, and Morgan Pickett, Market Forces policy analyst, who've both been at the forefront of efforts to have Australia's biggest banks listen to customers, climate scientists, and experts, and then take action.
PaulaWe examine how positive change was made possible and how we as bank customers can influence our financial institutions to do better for the climate and for the environment. So, Kyle and Morgan, thank you so much for being here.
MorganThanks for having us.
PaulaKyle, we love to start simple here. You've been working in this area for years now. What role do banks play in combating the climate crisis and particularly through their fossil fuel financing?
– What role do banks play in combating the climate crisis, particularly through their fossil fuel financing?
KyleWell, globally, there are thousands of banks. The ones that fund the fossil fuel industry tend to be the biggest banks in the world. Um, so we get down to a you know a handful of hundred that fund the fossil fuel industry. And the fossil fuel industry in particular is a money-hungry industry, trillions of dollars of debt in the last decade. Uh, and similar to you know, everyday people, we go to our bank when we when we need a loan, when we say want to buy a car, when we want to buy a house, or even when we want to deposit money. It's the same with the fossil fuel industry, except at a an industrial scale. So that makes them extremely important when it comes to combating climate change because they kind of are the linchpin in many respects as to whether the fossil fuel industry has the money it needs to expand, build new fossil fuel projects, and raise emissions.
MorganIt kind of goes beyond the money as well, doesn't it, Kyle? So banks obviously, yes, they lend money, they give money to projects, to companies, but they also have like a when they when they lend to the fossil fuel industry, when they're exposed to the fossil fuel industry, they give a sense of um credibility and signal to the market that this is a legitimate project or this is a legitimate business, we're in support of this. And so that can potentially risk crowding in more investment, more creditors to come in and be involved. And that's why it's so so much of a vicious cycle, a really problematic area.
AntonyAaron Ross Powell Morgan, it's clearly a global problem. Um why do Australian banks matter for the climate?
– Why do Australian banks matter for the climate?
MorganWell, that's right. Um I think globally Australia's banks rank what in the top 50, top 60, around that and kind of float around there. Um so they're important in that sense. But if you look at Australia as a country and what we produce and what we export, um we're one of the biggest fossil fuel exporters in the world, between two and three um in terms of coal, oil, and gas. And so what Australian banks support really matters. If if an Australian bank is involved in financing a project like um, I don't know, a fossil fuel project like Bitterloo Basin, or if they're supporting a company like Santos or Woodside, that that sends a signal to the market that, hey, there's domestic support for this project or this company, it's okay to get involved. Because banks don't operate in a in a vacuum. They don't operate as individuals, they tend to spread the risk, they like to operate with other banks, and they typically form like a syndicate. So you'll see a deal going through for a company, there'll be maybe 20, 30, 40 banks involved in that one deal. So when an Australian bank is involved and a Woodside or a Santos or another fossil fuel company is going to market and they're international markets, as Kyle laid out, there's only a hand, well, there's a small pool of banks that you need to get this money from. If there's not an Australian bank involved, then it creates cause for pause. Other banks will go, well, hang on, why isn't there domestic support? What is it that we don't see from here? What is it we that we don't know? And it just creates that bit of maybe we won't get involved, or this seems to be a greater risk, maybe we'll inc increase the rates that we expect from this kind of deal. And it makes it more difficult for a fossil fuel company to get a project off the ground if the if the interest rates are much higher. Um what Australian banks, although they might have a small dollar value exposure to a project or to a company, that that kind of credibility that they ensue or that they they kind of project onto a project or company really matters.
AntonyTrevor Burrus, Jr. And we've seen that, haven't we, with some Australian banks? Uh some have actually pulled out of funding coal, for instance, uh certain coal projects. Um as a result, international banks haven't haven't um joined joined the party, if you like.
MorganAaron Powell A great example is the Whitehaven Coal campaign or the Whitehaven Coal case uh study from a few years back. NAB, Westpac were involved in a revolving credit facility, essentially just a corporate credit card, Whitehaven Coal could use on whatever they want. It was just general corporate purposes, they could spend the money. But it was a billion-dollar product that they could use to expand their business, to dig more coal, to build or um extract more coal, have more mines. After a lot of public pressure from customers, shareholders, um, and and concerned community members, NAB and Westpac didn't participate in refinancing that credit facility and the whole thing fell over. Then Whitehaven had to go back to market and look for new ways to kind of find debt and to pay for new things. Um by doing so they had to go to private capital markets. And those interest rates are really exorbitant. So it really limits the business case of a new coal mine going ahead, say. If if you're paying maybe 12%, 13% interest rates, all of a sudden you go, well, that that coal mine's going to cost me a lot to build and to develop, um, just interest rates alone. So maybe we'll scale back the project. We can only afford to take on this amount of debt. And so it becomes a 10% um or 10% of the of the coal mine than it was planned to be.
PaulaIt's very clear that Australian banks have a significant influence. Kyle, I'd love to know um how Australian banks' funding of fossil fuels have and has changed
How has funding of fossil fuels changed over time
Paulaover time.
KyleYeah, so I think at this point it's probably important to take it back to the landmark Paris Agreement. Now, for those of those us who are listening who don't know what the Paris Agreement was, it was an agreement between uh basically every country on Earth uh to limit climate change to agreed safe levels, which was 1.5 degrees. It happened because there was an understanding that we were not on that trajectory. We were far from it. In fact, we were going to reach catastrophic levels of warming, and almost every country on earth recognised that we needed to do something about it to stop that.
AntonyAnd that was about 10 years ago, right?
KyleExactly. That was at the end of 2015. So when that happened, that gave climate action a lot of legitimacy, both um at the political level but also at the global corporate level, and that included Australia's big banks. So as soon as the Paris Agreement was signed, Australia's big four banks, so Commonwealth Bank, uh, ANZ, NAB and Westpac, all poured in, all agreed to uh align their businesses with the Paris Agreement. Um and that had significant ramifications at the time. However, the reality is that in the years following the Paris Agreement, the big four banks continued with more or less business as usual, which meant that they weren't really changing what they were deciding to finance, even though they had made these commitments. So they were still funding directly, um, and this is probably another important distinction to make that there are different ways that banks can fund the fossil fuel industry. The most egregious for a bank that's committed to the Paris Agreement is to fund a new fossil fuel project directly, because those are projects that are just scientifically incompatible with the goals of the Paris Agreement they're committed to. The banks continue to do that uh at scale in the years following the Paris Agreement, um, and it took a lot of campaign effort for that to change, which I'll get into in a minute. Um But we have seen a lot of change in the five in the most recent five years we've had. So in general, fossil fuel lending from the big four banks is coming down. Commonwealth Bank's a great example of this. In the years following the Paris Agreement, they were the biggest funder of fossil fuels. In the most recent five years, they've been lending the least to fossil fuels. Uh they've put more restrictions on funding new fossil fuel projects. And then even beyond that, which is actually you know kind of global leading in many respects, they've put restrictions on actually funding the companies that are expanding fossil fuels. So that's really brought it down at an aggregate level for the biggest bank in the country, which is a huge, you know. It's huge. It's huge. But then when we look at, say, ANZ and Westpac, they have continued to finance companies expanding fossil fuels at scale, even when we're 10 years on from the Paris Agreement. The amount of money they are lending to those companies has come down in aggregate, but they're still getting the money they need from these banks when they're being hit up for it. And that's a problem that we're still trying to address.
AntonyAnd Macquarie has entered the fray uh at a at an exponential level, right? Uh haven't they? Yeah, they've they've shot up to second. Is that right, in terms of funding fossil
– Why has Macquarie has shot up to second in terms of funding fossil fuels?
Antonyfuels?
KyleYeah, so Macquarie probably flew under the radar um up until a few years ago when it came to the big four banks and fossil fuel funding. Uh their portfolio, their lending portfolio wasn't on the scale of the big four banks, um, and therefore they weren't really a feature of um you know what was the most immediate pressing priority. That's completely changed in the last few years. Uh Macquarie shot up, as you said, to be the second biggest uh funder of fossil fuels in the country, just behind ANZ. And then what it is actually willing to fund is probably the most concerning aspect of this, which is it's willing to actually still fund things at the direct project level most prominently, is the is the Bedaloo Basin in the Northern Territory.
AntonyTrevor Burrus, Jr. So that's the Bedaloo Basin gas development that could become one of the biggest uh shale fracking
– The Beetaloo Basin gas development could become one of the biggest shale fracking developments in the world, how could that be compatible with the Paris Agreement?
Antonydevelopments in the world. Is that right?
KyleAaron Powell That's right. Yeah. It will rival if developed to the scale that the proponents are hoping to. It's gonna rival the biggest basins in the U.S., uh, which have seen a boom uh that is threatening to basically blow the Paris Agreement goals completely out of the water.
AntonyAaron Powell And they want to produce gas there for for how long? And and how could that be compatible with the Paris Agreement?
MorganSo I think you've got to look at how much gas they expect to be there in that basin in that in that reservoir. Proponents have said anywhere between 200 to 500 trillion cubic feet, which is a hard number to kind of understand. But as Kyle said, it would place it as being one of the biggest gas deposits in the world, one of the biggest um gas um extraction points in the world, the US, Saudi Arabia, Russia, the biggest ones are there, and they're about that scale. Um which you know it's d it's it's quite devastating. Uh but to consider starting large-scale production or extraction and production, burning this gas in the 2030s, is just choosing a path of catastrophic climate breakdown. Like the science is clear, the IPCC, the world's leading climate body, and the IEA, the world's leading energy body, have said that we cannot afford any new fossil fuels if we are to meet the goals of the Paris Agreement. Limit warming to 1.5 or well below two degrees.
AntonyTrevor Burrus, Jr.: And that's the intergovernmental panel on climate change and the International Energy Agency. I mean, very respected bodies.
MorganAaron Powell That's right. They're the leading bodies in the world. Thanks, Anthony. Um they've said that we can't afford to go ahead with this. So if you're looking at BetaLoo and you're saying, well, we want to start extracting in the 2030s and burning and we want to operate it for as long as we can, some even saying that we can burn this gas for 200 years plus, that's just not compatible with a safe climate. I don't know who will be burning that gas in 200 years because the world will be entirely different.
KyleTrevor Burrus, Jr. And it's worth also digging into the role that a bank like Macquarie has played in the development of the Betaloo Basin to date, which is that this was largely a dream of the gas industry that was thought not feasible to develop because of its very remote location and the fact that it's difficult to get it to the markets it needs to. Macquarie's lending to this project at the project level has suddenly poured in a bunch of serious major gas players that are making this commercial scale development more likely to occur. So the role that these banks play is foundational, really, when private debt providers get in and decide to provide debt to a project. They give it, as Morgan outlined at the start of this episode, a sense of legitimacy that suddenly crowds in more and more investment.
AntonyWell, Kyle, you mentioned earlier that um some of the big Australian banks and some banks around the world have have really been aligning their business a bit more with the with the Paris Agreement. They've been taking some uh steps to limit funding for fossil fuels. Um but last year Macquarie followed the lead of some major U.S. banks, United States banks, um which were emboldened, I guess, by Trump in a way and the the new um political climate over there. They pulled out of the net zero banking alliance. Now, many people may not have heard of that, but um uh all the same, uh that seemed to be uh trying to make some sort of impact. Um, what did that mean? And and you know, has this move made it easier for banks to step back from their climate commitments?
– have banks been stepping back from their climate commitments?
KyleAaron Powell Yeah, there was a real moment at the start of the 2020s, um, right around the time that COVID was happening, where the world's major financial institutions suddenly had a wave of commitments to net zero, and these initiatives, global initiatives, started to be kicking off. And there was an implicit uh understanding both from the institutions themselves and the rhetoric that they were saying public uh that get out of the way, we've got this, we're the solution to climate change. Um, our financing, the trillions of dollars that we manage, that's going to be what uh fuels the transition um and limits clo uh limits global warming to safe levels. Um the reality of those uh uh institutions, those uh initiatives, the Net Zero Banking Alliance, is that they were voluntary and they were only really as strong often as their weakest members, the US banks being you know, public point number one there. Because the US banks didn't really change their behavior as a result of being in these initiatives. Um certainly members of those initiatives, those uh banks like Commonwealth Bank is a great example, were taking more progressive steps, but it wasn't chalked up to the fact that they were part of the Net Zero Banking Alliance. So when Donald Trump did get elected in the US in 2025, uh it suddenly gave a wave of legitimacy to walk this back, which is frankly probably what always the intention was. Uh and then when you look at a bank like Macquarie, which was very at the forefront of uh advocacy for things like the Net Zero Banking Alliance in 2021, suddenly when it was politically convenient to change their behavior, uh they switched up and were the first Australian bank to get out of that alliance um at the start of last year.
PaulaAnd yeah, Macquarie, like you said, it really seems to have flown under the radar, but it is really key for people to understand that they are the second or yeah, one of the worst um when it comes to funding fossil fuels. Morgan, we know that for many years the majority of Australians have cared deeply about the climate and they do want greater action. Um I'm wondering from your perspective, what role have customers and shareholders played in getting the banks to cut its finance to coal oil
– What role have customers and shareholders played in banks cutting finance to coal, oil, and gas?
Paulaand gas?
MorganYep, that's a that's a great point, Paula. So if if hearing all this stuff, hearing the trillions of dollars investment, the fossil fuel expansion that seems to be just burning ahead, you can feel disempowered. Um and a lot of people feel disempowered about climate change. You know, you go to the vo the voting ballot in Australia, you can you can vote once every three years and have your say on a range of issues, including climate, and try and get some politicians to do some action. But you actually have a lot of power as a bank customer or a shareholder over these institutions and encouraging them or putting pressure on them to do the right thing. So there's been a lot of work uh put into this over the last decade or so on Australian banks. And I think um a large part of the reason we've seen such great movement in this country from Combank, from NAB in particular, has been from customer pressure. It's been from customers, whether you have a bank account that has 20 bucks in it, um, or you've got a substantial deposit or a substantial shareholding in those institutions, telling them, hey, I'm a customer, I'm a shareholder, this is my value to you. What are you doing? Are you investing in fossil fuel expansion? Because if you are, that doesn't align with my values, that doesn't align with your commitment to the Paris Agreement, and I want answers, or I'm gonna look at the market. You know, you have the ability to look and put your money elsewhere. Um and so that pressure, sending that message to those banks is really important and something that everyone can do. Everyone has a bank account. So highly encourage people to visit Market Force's website. Um you can see not only how the banks are comparing, who they're funding, how much they're investing in, whether they're supporting new fossil fuels, but it also has tools there um to enable you to really easily just contact the bank. Contact your bank, contact your superfund, tell them, I want you to do this with my money, that's my values.
AntonyYeah, well, no question. There's been some a lot of customers really concerned. And and um and you mentioned shareholders as well, uh, Morgan. And um, Kyle, over many years, um, we've seen shareholder resolutions place some serious pressure on the banks, um, some quite significant votes. Um, can you explain what's that all about and um you know why is this so?
– Why do shareholder resolutions play a role in shifting finance from fossil fuels?
KyleYeah, I mean it's a great point that Morgan raises, which is when a bank makes a commitment and then its actions and behavior doesn't align with that, well, what power do you possibly have to influence a decision like that? And Morgan correctly outlined that you can contact your bank and you can tell them that it doesn't align with your values, and that certainly sends a very powerful message to the bank to change its behavior. And shareholder resolutions play a very similar role for this, which is that a shareholder resolution in effect is something that gets tabled at a company's annual general meeting, which means it has to be voted on by all of the company's shareholders in effect. Annual general meetings uh they happen you know every single year. That's what annual means. And well done, research journal. Yeah, yeah, exactly. Um and shareholders have an opportunity to vote on things that matter to the company. So they will vote on whether uh the directors of those companies get elected, they'll vote on things like whether the executives get their remuneration packages uh for you know delivering shareholder returns, things of that nature. And climate is also something that should be tabled because it is a material issue to basically every single company in the economy. So a shareholder resolution, uh as an example, might be: well, a bank has made this commitment and then its financing activity is over here, which seems to contradict this commitment. Can the company provide disclosure that reconciles these contradictions or provide any more disclosure about how it's managing these risks? And then that has to be voted on by all of the investors and it has to be discussed at the company's annual general meeting, which means that the board of that company, the executives of that company, have to engage with the fact that its commitments and its activities aren't aligning with each other, which can be quite a powerful thing. Trevor Burrus, Jr.
AntonyAnd we've seen even, say, ANZ Bank recognize uh that climate is a material risk, even though they're still uh one of the biggest funders of fossil fuels.
– Banks acknowledge climate change is a material risk
AntonyIs that right?
KyleThat's right. I mean most banks recognise that climate change is a materialist to their business. Um they, you know, banks in Australia hold a huge amount of mortgages. Houses in Australia are at massive risk from uh the physical impacts of climate change, which are both.
AntonyAnd we're seeing that more and more every year within mass uh skyrocketing insurance costs and premiums and things like that, right?
KyleAaron Ross Powell Exactly. So it's it's a matter not just for the banks themselves, but all Australians. And the banks definitely appreciate this as a business risk. Um so having this tabled and actually saying that the the bank seems to acknowledge these contradictions, what is the bank going to do about it? Again, it's a really powerful thing to bring directly to the board level and make them consider.
PaulaSo if they if they acknowledge the risk as a very real thing, like why? Why? You know, are they still pouring billions into the you asked the hardest question.
MorganI guess stepping back and looking at it more broadly, so banks, as Kyle outlined, are kind of a critical pillar to how the whole economy functions. And if you look like at a country like Australia, our economy's been built on a dig and ship uh kind of model. We extract resources here, we export them overseas. And fossil fuels are a large part of that, as we outlined. We're one of the biggest exporters in the world. So it's going to take a lot of time, or it should it's been taking a long time for the banks who are systemically exposed to the economy. They tend to be uh have a role in almost every business in the entire Australian economy. It takes a while for them to move that or move away from that. It is possible. Um but they're profit-seeking entities. Like banks want to make a dollar.
PaulaYeah.
MorganThey are and there are certain in people with views of of various sorts about climate change and the impacts and the the reality of it. Uh, but ultimately they want to make a return on their investments, or they want to make a return for their shareholders. So they still support fossil fuel companies, they're still expect supporting fossil fuel extraction and and and new um projects and developments. ANZ, as we've outlined, is the biggest funder of fossil fuels in Australia. Um it is still doing some terrible deals. It is supporting Shell, BP, some of the biggest fossil fuel companies in the world. It is still have has its door open to these companies and hand out money. So they're not there yet. And um several of Australia's banks are not there yet.
KyleAnd just to add to Morgan's point, I think a lot of banks still fundamentally think that climate change will be bad, but it won't be bad for them, or not as bad as it's forecast to be for the entire economy. And this is not just something that applies to banks, it implies to a lot of investors out there, which is yes, it will be bad. Yes, it will have global economic impacts that will be borderline disastrous, but not for us. And I think that speaks to an issue that is a fundamental thing at the corporate financial level, which is we can navigate our way around this with clever financial strategy.
MorganI think Kyle picks up on a really good point, and it's that short term, isn't it? Thinking. They can only look so far ahead. They have modeling, like economic modeling data points that they can look at and try and understand under various scenarios of warming, how much risk do they face. And the models aren't really built for that. So even last year Australia produced the National Climate Risk Assessment. There was a really key part in that document that a lot of people probably skimmed over, or it's a pretty dense document. I'm not imagining many many listeners would have read it entirely. But essentially, from the National Climate Risk Assessment under a two-degree scenario or three-degree scenario, which is kind of the current trajectory, there will be widespread disaster and damage that will severely impact the Australian economy. And that, as it says in the National Climate Risk Assessment, is an underestimate based on the methodology and based on the way that they can model that. Models can't predict how bad this will become because there are vicious cycles that start to ensue, various tipping points that create feedback loops that make this whole thing just kind of spiral out of control. Right? And so, as Kyle said, they're looking at it going, no, well, it won't be so bad for us, because their models are telling them it won't be so bad for you. And by the time it does become that severe, we'll be able to exit things like mortgages, or we'll be able to, you know, reduce our exposure to that part of the economy, the impact of we're kind of a theory, or we live above this and we continue to make money, and really we just want to make money for our shareholders in the near term. And sure, that's a big a wicked problem that is in in the on the horizon, but we're just a humble little bank trying to make some money for people.
PaulaSo a big part of your work has been shifting the bank's philosophy for finance. Um can you tell me more about why this is so important? I mean you've kind of been
– Why is it important for banks to shift finance from fossil fuels?
Paulatouching on it.
MorganSure, I get and I guess for your average person uh who's just living their life, um they may see a few headlines about this, they might say they see that climate change is happening, or they look at you know their bank app or they see a bus go by, and there's a lot of greenwashing. There's Westpac and and you know um wind turbines or solar farms. So a lot of this just kind of goes unnoticed, unseen, which is I guess where we come in. We're trying to shine a light because as an everyday person, you don't get to see what the banks are putting their money into. Like those are private deals, they are contractually obliged to keep it a secret. Um but we, as market forces, uh a large part of our role is monitoring deals, monitoring the market to see where that money is actually going to, who the who the companies are, the projects, how they align with the Paris Agreement. And what we're seeing is really disconcerting. We're seeing ANZ and Westpac finding a new wave of fossil fuel expansion while Combank and NAB are bringing in policies to reduce their exposure and reduce supporting fossil fuel expansion, which we know will make climate change worse. And policy is so important in this. I know it's very dry, but if you put it in the black and white, you get past all of that greenwashing, all of the wind turbines and solar farms, and we're supporting green energy, that's all well and good. But if you're supporting fossil fuel expansion, if you're pumping, supporting more emissions in our atmosphere, you can bring on as many renewable projects as you want. It's not going to make climate change uh better. It's own if if everything keeps if we keep burning more fossil fuels alongside the renewables. So it's really important that banks bring in place policies that restrict um their lending or support of fossil fuel expansion and fossil fuel companies who are not changing their businesses to align with the Paris Agreement, which is a m vast majority of them. 95% of fossil fuel companies are expanding.
AntonyAnd Kyle, there have been big steps forward in policies, haven't
– Big steps forward in banks’ fossil fuel policies
Antonythey?
KyleYeah, massive steps forward. And I mean policy is such, as Morgan said, an incredibly dry topic. Um probably very disengaging for a lot of people. But it is it's fundamentally important and why we've spent so much time on it uh at Market Forces is getting the policy right because the slightest difference in wording can be the difference between whether something gets the finance it needs to proceed. I don't know, the Beateloo Basin could be an example of that, or whether it doesn't. And the only way that you, as a customer or as a shareholder, or as even as a member of the public, can have assurance that that's not going to go ahead is when that policy is airtight. Um and we've seen some really great uh progress over recent years. Again, Commonwealth Bank is a fantastic example of this where uh they've brought in a policy to effectively restrict finance to any fossil fuel extraction company that doesn't have a transition plan that's aligned with the goals of the Paris Agreement. So it basically means that if they're if they have plans to continue developing new projects which aren't aligned with the Paris Agreement, then it's going to fail that test. And that means that they won't be getting finance from Commonwealth Bank anymore.
AntonyAnd it has to be credible.
KyleExactly. Yes, it has to be credible, it has to be scientifically aligned. Um and it's quite evident in terms of the deals that we're monitoring that Commonwealth Bank is taking this incredibly seriously. And that's what we should be seeing from banks at a global scale who are committed to the Paris Agreement, because that is foundational. You shouldn't be rocking up and waving through uh deals for companies with aggressive expansion plans.
AntonyWell, we've touched on this a little bit already with um the shift globally, with Trump and other politicians um uh joining the fray, if you like. Um Morgan, um the banks, you know, clearly that they don't operate in a vacuum. Um they you know uh so what what role does politics play, do you think? Um and certain politicians, for instance, uh denying that climate change exists or minimising the impacts of climate change. You know, what sort of impact does that have on the banks uh taking climate action and and being the climate leaders they
– What role does politics play in banks taking climate action?
Antonysay they are?
MorganSo it's a tough question, Nancy, because I don't want to tread too much into the public policy side of things or point out specific politicians. But it's a really important part. And I guess we've seen in Australia over the last decade or more. Um I mean, in 2022, the Albanese government came in and declared the end of the climate wars. We have had climate wars in this country for quite some time. Essentially, we've had a status quo, um, governments uh realizing that we are a mass exporter of fossil fuels and not, you know, being lobbied heavily by an industry that has so many resources, so much capital to quash any climate action. Um so businesses have kind of, for a long period of that time, had to kind of step up. Um and we were, you know, along with customers, shells, people were encouraging them to step up. We saw a bit of action there. But it matters for banks, it matters for other corporations because they have skin in the game, unlike politicians. Politicians can say and do whatever they want effectively, they can put out policies with their own justifications, but we know that climate change is going to have a material impact to Australia, Australians, and the economy. And the banks are exposed to that materially. They have mortgages. So the Big Four is a great example. They can they they own, I think it was around 70% of mortgages in Australia. Mortgages are a 30-year product. Um essentially, they own your house while you're paying it off. And sure, there's insurance, but insurance, as we've kind of touched on, is an ever-increasing uh risk. Like insurers are reducing their their comfort level of insuring houses in certain areas, regions, and districts. And as climate change becomes worse, insurance won't be available to a lot of people. Now, to have a house, to have a mortgage, you're contractually obliged to have insurance. If that dries up, the banks hold the risk. Uh, and our economy is built on banks having those mortgages. So we should be seeing more of an incentive for them to do right by the climate and to kind of reduce that risk and protect their future from this impending kind of catastrophe. They have a huge role to play in this.
KyleAnd I think it's worth digging a bit more into uh government policy, really, is the result of, you know, interests from a diverse range of actors in the community and the economy coming together and essentially fighting for their interest. And often it's the result of, you know, lobbying efforts. The fossil fuel industry, as Morgan identified, is a very powerful lobbyist. Um, and it sends a lot of pot lobbyists to Canberra or even to the state level to lobby for its interests, uh, to lobby for what it wants to go ahead. And you need powerful corporate actors that want to see the energy transition happen that's in line with the goals of the Paris Agreement, which is not what a lot of uh actors in the fossil fuel industry want. In fact, it's quite the opposite. Uh so having powerful corporate actors come out and be passionate advocates for the energy transition, for the goals of the Paris Agreement, means that it's more likely to go ahead. So that's why having a strong business sector matters, because it has to be a counter to the vested interests of the fossil fuel industry, which have repeatedly demonstrated over the last 50 years that they're by and large not interested in the world achieving the goals of the Paris Agreement or preserving a safe climate. It goes against their business model.
AntonyThere are big companies around the world and in Australia who've been really wanting to exit from fossil fuels and shift towards renewable
Renewable energy is cheaper than gas
Antonyenergy.
KyleWell, the renewable energy uh is now cheaper than fossil fuels and has been for some time. The actions of the gas industry in Australia have by and large been over the last 10 years, 20 years, been to extract more gas and produce more gas than we ever have before and export the majority of it overseas. And that has led to prices of energy for Australian businesses and Australian households increasing massively. So we're at a point now where, as customers of the fossil fuel industry, Australian businesses do want to transition because it's actually going to be better for their uh businesses, not just because it's renewable energy is cheaper, but also because they want to live in a livable planet at the end of the day.
MorganI think it's such a good point you raise, Ekar. There's so many myths and there's so many uh a lot of talking points of the fossil fuel lobby put out that gas is essential for the transition, that it's needed for manufacturing to power homes, to heat them. It's all nonsense. It's very expensive fossil fuel. Companies and and consumers are kind of who are tied to it want to get off it as quickly as possible because it's so expensive. And not only that, but it's damaging our climate. So it it there is a really clear business and and and commercial incentive to get off these expensive fossil fuels as quickly as possible. And like Kyle said, the export market is kind of tied to the Australian energy market. If we're exporting such a large amount of gas, um Australian households are going to have to pay more for their gas. Businesses are gonna have to pay more for their gas. So manufacturers across the East Coast realize this and are doing putting in place measures to get off gas dependence as quickly as possible. Even in industries where it's it's difficult and it's almost a feedstock, it's part of their business production point. They're putting a lot of investment, a lot of energy into understanding and and figuring out ways to bypass that need using renewable solutions or um alternatives.
PaulaThe gas industry just seems to really be putting metal to the pedal when it comes to the propaganda. Um there's so many narratives happening. I guess I want to talk about risk. We've kind of touched on it a lot. Gas prices shooting up, climate impacts. What do you think are the biggest risks now with Australia's biggest banks funding
– The biggest risks banks funding fossil fuels
Paulafossil fuels?
KyleIt's been a hard fight against Australian banks funding coal. That was a big fight when the Paris Agreement was signed uh just over ten years ago. Uh coal is the most polluting, is the most polluting fossil fuel that there is out there, and there was a real imperative to make sure that um as little coal as possible was burned uh in the transition to net zero emissions. And that's actually been a really successful global campaign when it comes to banks funding coal. Um we've seen a lot of restrictions when it comes to that industry. It's been no different uh with Australia's big banks, as Morgan uh correctly identified. We had NAB and Westpac, which are our last um big four banks funding our largest undiversified coal miner, Whitehaven, just a few years ago. That's done. And we're getting closer and closer to their actual coal lending, getting closer and closer to zero. But with having said that, gas globally is now the fastest growing source of emissions. Um, and gas is far less restricted than coal is when it comes to banks' lending policies. So that's a massive risk. It is still not viewed in many circles as the dangerous fossil fuel that it is, or as polluting as it is, as much of a risk to the goals of the Paris Agreement that it is. Um because of that, we're seeing things that frankly shouldn't be getting off the ground get off the ground. And I think uh a flash point for that in Australia right now is the Betaloo basin.
AntonyWell, there's certainly been studies showing that methane, and and let's face it, um majority of liquefied natural gas is is methane, that is just as dangerous or more dangerous for the climate than coal. Uh so um Morgan, who are the biggest financial backers of Betelou that you've been talking about? Betaloo being uh huge basin of gas in the Northern Territory and and gas expansion in Australia.
– Who are the largest financial backers of Beetaloo fracking and gas expansion
MorganIt was right, you pick up on a couple of key points. Methane is a very potent fossil fuel and gas is very potent. So although it might not have the same um lifespan um in the atmosphere, it because it's so potent, it kind of fast tracks climate change. So the more gas we pump in in the atmosphere now to replace coal, as the industry would like to tell you, um, really just puts the pedal to the metal. It fast tracks disastrous climate change and makes those impacts a lot worse. Now, the reason BDLU is so important and such a problem is because it's a massive gas development. As we touched on earlier, this is one of the biggest gas developments in the world. This is certainly the biggest gas development in Australia's history. Now, it's not a done deal, despite what the headlines might say in the Northern Territory or what certain political leaders will want you to think, or fossil fuel interests will want you to think. Um, Betaloo is still at a pilot project level. So it's still really speculative, um, but it's it's really dangerous. So now is the most important time to head it off, to stop it from happening, um, keep the gas in the ground before it gets released into our atmosphere. Uh so look, banks have various roles in Betaloo and exposure. Um Macquarie is the biggest financer of the gas extraction companies. So there's two leading um frackers, uh, Betaloo Energy Australia and Tambouran Resources. Macquarie is lending to both of them. It also has share holdings in both of these companies. It's essentially betting on them, making Betaloo um commercially viable, uh, and then their plans will be to cash out, right? Make as much money as they can quickly, and essentially supporting this project off the ground. So that's Macquarie's role, that's what they've been doing. But the other big four banks have been exposed to an extent as well. So APA Group, Australia's biggest pipeline company, is proposing to build an enormous pipeline from Australia's Outback all the way to the East Coast to direct this gas from Betaloo, frack gas from Betaloo, to export markets through Gladstone LNG and out of Queensland and export it to Asia. Trevor Burrus, Jr.
AntonyAnd some of that's supposedly under the guise of for the East Coast market to so that people can have gas in their homes.
MorganAaron Ross Powell The only way that Betaloo makes commercial sense is if they can export the gas. That's been the case in Australia for a long time. And that's why export, you know, gas exports are around 80%. Because the Australian market is quite small. Uh Asian the Asian market is is huge. There are energy demand-wise, I mean, not gas demand. But um yeah, they they want to pump that gas from Betaloo. The business model is pump it out of Betaloo, frack it there, and then export it out of Queensland. Eventually they want to build a pipeline north to export out of Darwin as well. Um but they don't have the infrastructure in place there, they don't have the export infrastructure in place to be able to do that. So APA Group is planning on building this massive pipeline and starting construction in 2028. Now, the big four banks are exposed. So Combank, NAB, Westpac, and ANZ all have a commercial um exposure to APA Group. They support the company with general purpose corporate finance. Uh but ANZ is the only Australian bank that doesn't have a pipeline policy restriction. So they are able to finance directly this pipeline being developed, which is the whole purpose of the pipeline is just to move a new resource and export it overseas.
PaulaAaron Powell Kyle, could you tell us a little bit more about ANZ's movements? Um, why are they backing Betaloo gas and other companies expanding
– Why is ANZ's backing Beetaloo fracking and expanding fossil fuels?
Paulafossil fuels?
KyleWell, ANZ is the only bank in Australia that can still fund this pipeline, this first big pipeline that's going to transport Betaloo gas from the middle of the Northern Territory out to Australian export facilities and send the gas overseas. Now, ANZ has policies in place that rule out other types of project finance for new fossil fuel projects, but not pipelines. And it wouldn't have that policy or that pol lack of policy in place if it didn't have the intention of at least entertaining a deal like this. Banks don't make these decisions lightly, they don't make these decisions by accident. And the fact that they have left themselves open to the possibility of doing this raises a lot of red flags and should, for frankly, every ANZ customer and shareholder out there that's listening to this. We have had success with ANZ and ruling out other types of new fossil fuel projects before. Um Papua LNG is a great example of this overseas. Um to give a little bit of detail about how powerful these campaigns can be, about 15 years ago, Papua New Guinea built its first gas export project. And it got the biggest project finance deal uh in history. It was over $10 billion. Uh, every bank in the world that was falling over themselves to get involved in this thing. And then fast forward about 14 years later, and their second gas export project going for the same thing, and all of these banks, including ANZ, suddenly are running the other way because of the campaigning efforts around the world on banks when it comes to climate change. This was no longer a project they wanted to touch. But then when it comes to things like this, which arguably the climate impacts are going to be far worse from a project like the Betaloo Basin, they've still left themselves open to the possibility of doing that, which kind of makes no sense from a logical standpoint. So they should really take the next logical step and rule this out. But they wouldn't have this open if they weren't seriously considering it.
MorganTrevor Burrus, Jr. And there's an opportunity here. This is the perfect moment to be talking about this because this coming November, ANZ are due to put out their new policy suite. And that will include fossil fuel finance restrictions. There is a big campaign and a big grassroots movement at the moment of customers, shareholders concerned, community members calling on ANZ to rule out financing this new pipeline for the Beetleo Basin. So if you're listening to this, if you're an ANZ shareholder or a customer, get involved, you can contact the bank, tell them to rule out financing the North to East Australia Pipeline, API Group's pipeline, that will make climate change worse.
AntonyWhat's the best way for people to find out about their bank's funding and how can concerned people take action for the climate?
– How to find out about your bank's funding and take action for the climate?
KyleWell, a huge part of why market forces exists and why it started out in the first place was to demystify what was going on. As Morgan said, the banks don't publish this information in detail, they publish it in aggregate. Their lending decisions are behind a smokescreen, and we try to shine a light on that and show people exactly what their bank is funding and whether it's actually stacking up to what the bank says publicly, what it tries to almost greenwash with its image. So you can go to our website and check out our Compare Banks table. It's got a list of every uh deposit-taking institution in Australia, big and very small. It uh details there whether or not they have any fossil fuel exclusions. And if they are funding fossil fuels, the extent to which they are doing that. Uh, if you find out that your bank is funding fossil fuels and fossil fuel expansion, you can send that bank a message directly. We have an email there that's uh written out for you to send to your bank and put that bank on notice. And the thing is, over time, banks do listen to this. The last thing that a bank wants you to think about when you're a customer of theirs is that they're funding the climate crisis. They want you to have a positive association, which is to have good interest rates or they have nice customer service. The last thing they want you to think is that my bank is actually uh funding uh a not livable planet. So it's very important for people who that is their values to understand that and then to take action because that's how you change the industry.
AntonyWell, Kyle and Morgan, um thanks very much for joining Climate Biz Matters and shedding a light on what's going on with the banks and uh and climate change.
Kyle & MorganThanks for having us. Thanks for having us.