ANZ’s response to Market Forces report, July 2024

ANZ is supporting the energy sector to transition to net zero through our financing solutions.

While doing so, our financed emissions included in our emissions reduction pathways for the power generation, oil and gas and thermal coal sectors, have reduced by 25%, 30% and 96% respectively, between 2020 and 2023.

For details on our approach to financing the energy sector, refer to our Energy Customer Approach on our website. Energy Customer Approach explains the words that are underlined as well as providing important information in the disclaimer.

As a member of the Net-Zero Banking Alliance (NZBA), ANZ has committed to transitioning our lending portfolio to align with net zero financed emissions by 2050.

Our response to the July 2024 Market Forces report is as follows:

1.   Methodology

• While we have significant questions about the methodology of the report, we are not surprised to be mentioned given we are the largest domestic lender to Australia’s energy sector. It’s important to remember this is the most carbon intensive part of our economy and financing its transition to net zero will require significant capital.

• The inclusion of diversified miners and multinational conglomerates oversimplifies the complexity of the transition. Market Forces’ view would suggest that financiers should no longer finance the named companies, some of which are rapidly expanding renewable energy production or producing commodities important for the energy transition.

• ANZ rejects the lack of differentiation between thermal and metallurgical coal. As at September 2023, our exposure at default to coal mining includes exposures to metallurgical (coking) coal used for steel making $0.65bn and thermal coal used for energy generation $0.26bn. We will continue to support our metallurgical coal mining customers as there are no readily available substitutes for its use in steel production at scale. There are several metallurgical coal customers included in our large emitters engagement program who we are engaging with to encourage them to develop their low carbon transition plans.

2.   “ANZ is still Australia’s biggest funder of fossil fuels since Paris.”

• As the largest domestic lender to Australia’s energy sector, the most carbon intensive part of our economy, we want to support this sector’s transition through our financing solutions.

• In addition to our customers in Australia, this includes energy sector customers through our network in NZ, PNG and International.

• We acknowledge oil and gas are still needed as we transition, especially gas as ‘firming’ for renewable energy and in industrial use – considering the intermittent generation of renewables, gas will continue to play a balancing role. We continue to assess the role of oil and gas within the context of the broader energy market, public policy developments and stakeholder and shareholder expectations.

• Our financed emissions included in our emissions reduction pathways for the power generation, oil and gas and thermal coal sectors have reduced by 25%, 30% and 96% respectively, between 2020 and end 2023.

• Since 2015, we have reduced lending provided directly to thermal coal miners by around 85% – it is now around 0.02% of our Group exposure at default. Our exposure to thermal coal miners will continue to decline in line with our target to reduce absolute financed emissions from our lending directly to thermal coal miners by 100% by 2030, and with our existing lending policies detailed above.

• Our remaining direct exposure to thermal coal miners is largely mining rehabilitation bonds, which will continue to be provided to existing customers to ensure their responsibilities with exiting mine sites are fulfilled. We will have completely exited other direct exposures by 2030. As at 30 September 2023, rehabilitation bonds were $169m, which equates to 64.7% of our exposure to thermal coal miners under ANZSIC code 1102.

Additional information:

In 2023, we disclosed progress against our existing pathways in six key sectors and set 2030 targets in two new sectors: Thermal Coal and Transport sub-sectors (Aviation, Shipping and Auto Manufacturing).

This does not currently include targets in relation to ‘facilitated’ emissions such as bonds. However, the updated NZBA guidelines released in March 2024 will require banks to include bonds in targets by November 2025.

We will review our existing – and any new – pathways and targets to incorporate bonds or other relevant facilitated emissions by November 2025.

We have set lending policies for the energy sector, including:

• phase out direct lending to thermal coal miners and coal-fired power plants by 2030
• reduce our exposure at default to upstream gas customers by 40% by 2025 from a 2020 baseline
• not onboard new upstream gas customers or provide lending to new to bank customers that derive more than 10% revenue from thermal coal mining
• not directly finance new or expansion:
  • upstream gas projects,
  • thermal coal mines or extensions to operating life of existing mines,
  • coal-fired power plants