Climate Change Position Statement and 2020 Action Plan - Westpac
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Climate Change Position Statement and 2020 Action Plan
Westpac Group has long recognised
that climate change is one of the most
2
significant issues that will impact the
long-term prosperity of our economy
and way of life.
Managing this impact requires Since we set out our first climate commitment to operate in a manner
collaborative efforts to limit global change action plan almost a decade consistent with limiting global warming
warming, while also taking steps to help ago, we have been helping customers to less than two degrees Celsius above
the economy and communities become and communities transition to a low pre-industrial levels.
more resilient to the expected effects. carbon economy.
For us, this is about ensuring future
As a major financial institution, This climate change position statement generations can enjoy a healthy
Westpac has a fundamental role and action plan builds on our strong environment and prosperous economy.
to play in this process. track record, outlining the next phase
Climate of actions we are taking to meet our
Change
Position
Statement
and 2020
Action Plan
Our
Principles. 1.
A transition
2.
Economic
3.
Addressing
4.
Climate-related
5.
Transparency
The core principles that guide to a net zero growth and climate change risk is a and disclosure
and inform our approach are: emissions emissions creates financial financial risk. matters.
economy reductions are opportunities.
3 is required. complementary
goals.
Our
Action Plan. 1.
Provide
2.
Support
3.
Help individual
4.
Improve and
5.
Advocate for
These focus areas will direct finance to back businesses that customers disclose our policies that
our actions. We will: climate change manage their respond to climate change stimulate
solutions. climate-related climate change. performance. investment in
risks. climate change
solutions.
Climate
Change
Position
Statement
and 2020
Action Plan
Context.
Context.
The Intergovernmental Panel on Climate Change (IPCC) – the international scientific body
responsible for monitoring climate change – has provided evidence that the climate is warming
and that human activity is the primary cause of this increase, which is altering weather
patterns globally.
4
To reduce the risks and impacts of Westpac was the first Australian bank We are transparent about how we
climate change, 194 countries signed to recognise the importance of limiting assess and manage these impacts
the Paris Agreement, including and global warming to two degrees3 and across our business, measuring and
since ratified by Australia, committing that to do this global emissions need to reporting on our climate-related metrics
to strengthen the global response reach net zero4 in the second half of this since 1996. We launched our first
to climate change by “holding the century5. Using our expertise, we are Climate Change Position Statement in
increase in global average temperature helping our customers and communities 2008; this marks our third update of
to well below two degrees Celsius manage this transition and believe that that statement, and we will continue
above pre-industrial levels and to effectively identifying, managing and to strengthen our approach as science,
pursue efforts to limit the temperature mitigating climate change risk will have technology and policy develops.
increase to 1.5 degrees Celsius…”2 positive community and economic
benefits in the future.
The scientific consensus sees
irreversible damage and extreme We apply the same rigour in managing
weather effects taking place should this change as we do with any other
global warming exceed two degrees. transformational issue facing the
Meeting the commitment will require economy. We examine the policy, legal,
each signatory country to take action technology and market changes related
to limit greenhouse gas emissions, to climate change (‘transition risks’).
which will involve significant changes We also look at the financial impact of
in the global economy. changes in climate patterns and extreme
weather events (‘physical risks’).
Climate
Change
Position
Statement
and 2020
Action Plan
1 Fifth Assessment Report, IPCC, 2015. 4 Westpac Banking Corporation 2015 Annual General Meeting Chairman’s Address, 2015.
2 Ibid. 5 By 2050 for the Australian economy.
3 Westpac 2013-2017 Climate Change Position Statement and Action Plan, 2013.
Our principles.
Our principles. The core principles underpinning our approach are:
1. 2. 3. 5.
A transition to a net Economic growth and Addressing climate Transparency and
zero emissions economy emissions reductions are change creates financial disclosure matters.
5 is required. complementary goals. opportunities.
Accurate, timely and relevant
Net zero emissions means the Many countries have already Addressing the impacts of climate information about climate-related
greenhouse gases emitted shown that economic growth change requires investment and a risks and opportunities is key
globally must equal the emissions can be achieved whilst reducing shift in business models. Westpac to assessing and managing the
captured—through initiatives emissions. Whilst there can be an can act as a market facilitator, impacts of climate change. We
like adopting renewable upfront cost to managing climate supporting affordable technologies are transparent about how we are
energy and clean technologies, change, our research indicates and companies that will drive the addressing these impacts across
carbon sequestration, reducing that policies that incentivise early transition to a more sustainable our business. We also work with
deforestation and planting trees investment will lead to stronger economic model. our business customers to identify,
to create new forests. The sooner economic growth over the manage and report on how they
are addressing climate-related risks
4.
we can reach net zero emissions, medium and long term.7
the more opportunity we have of in their own operations.
keeping climate change below We have always sought to play
the two degree ambition.6 a constructive and responsible Climate-related risk
role in the development of an is a financial risk.
The path to net zero emissions appropriate policy response for
needs to be well planned and the economies we operate in. Risks associated with climate
occur in an orderly fashion. For over a decade, Westpac’s change may impact on companies’
For the energy sector, this preferred policy position has financial performance and the
means also balancing the needs remained consistent: that a stability of the financial system.
of energy security, reliability broad market-based price on Westpac has long stated that
and affordability. carbon is the most effective, climate-related risk is a financial
affordable, flexible and equitable risk. This is why we have been
Climate means of achieving emissions working with our customers
Change reductions, at the least cost, and investors, and disclosing
Position across the economy.8 information on our approach
Statement to this issue, since 2004.9
and 2020
Action Plan
6 Fifth Assessment Report, IPCC, 2015.
7 Westpac Group 2016 Annual Sustainability Performance Report, 2016.
8 Westpac Group 2005 CDP submission, 2005.
9 Westpac Stakeholder Impact Report, 2004.
6
Our approach to When assessing a project or prospective In addition, we apply the Equator
customer, our credit officers, deal Principles (EP III) to project finance
environmental, social, teams and sustainability specialists transactions, project-related corporate
and governance assessment screen against: loans, and bridge loans with a tenor
of less than two years that are intended
of companies and projects. • Environmental risks, such as water to be refinanced by Project Finance
quality, waste, deforestation, and or a Project-Related Corporate Loan
Westpac has a Board-approved Risk impacts on high conservation (where certain specific criteria are met
Management Strategy that covers value areas. This includes screening as required by the Equator Principles).
sustainability and reputational risks. against this position statement
on climate change; If the identified ESG risks do not meet
This strategy is underpinned by Westpac’s risk appetite—which includes
a number of key risk documents • Social risks, such as workplace a requirement to meet the criteria
on sustainability such as our: health and safety, human capital outlined in our position statements—then
management, and our position we will not proceed with the transaction.
• Sustainability Risk statement on human rights;
Management Framework;
• Governance risks, such as the
• Reputation Risk customer’s practices on risk culture,
Management Framework; corruption and bribery, shareholder
rights, board composition, and
• Environmental, Social & Governance
disclosure and transparency; and
(ESG) Credit Risk Policy; and
Climate • All other Westpac position statements.
Change • Risk Appetite Statement.
Position
Statement
and 2020
Action Plan7
Action plan 1.
rovide finance to back
P
climate change solutions.
Climate
Change
Position
Statement
and 2020
Action PlanAction Plan. 1.
Provide finance to back
climate change solutions.
8 Transition to a net To address the physical risks of Building on the climate change
climate change, we also support scenario analysis Westpac Climate change solutions
zero emissions investment in infrastructure completed in 2016, we have set include, but are not limited to,
the following activities:
economy is reliant that improves the resilience of our targets based on the current
our communities to changing outlook for investment in climate
on the availability weather patterns. change solutions that is required
• Renewable energy;
of cost effective low to remain on a credible pathway • Energy efficiency
to a net zero emissions outcome technologies;
carbon solutions. In We will: by 2050.
our role as a financial • Green buildings;
• Increase our target lending We define climate change
intermediary we act exposure to climate change solutions as those technologies • Low-emissions transport;
as a market facilitator solutions from $6 billion to and practices that are consistent • Waste;
$10 billion by 2020; with the investment required
and partner to existing to limit global warming to less • Water;
and new customers, • Facilitate up to $3 billion than two degrees11 and address
in climate change solutions its impacts. • Carbon abatement and
backing financially by 2020, e.g. green bond sequestration projects;
viable, affordable, issuance and arrangement;
• Forestry and land
and
low carbon solutions rehabilitation; and
that will drive the • Increase our target lending
exposure to climate change • Adaptation infrastructure.
transition to a net zero solutions to $25 billion
Climate emissions economy by 2030.10
Change
Position
whilst accelerating the
Statement reduction in emissions.
and 2020
Action Plan
10 This target will be updated in the next update of this strategy to reflect changes in technology, policy, climate science and investment assumptions and as our approach evolves.
11 As per our scenario analysis and external sources such as the IPCC Fifth Assessment Report and Climate Bond Initiative’s criteria.9
Action plan 2.
Support businesses
that manage their
climate-related risks.
Climate
Change
Position
Statement
and 2020
Action PlanAction Plan. 2.
Support businesses that manage
their climate-related risks.
10 Transition to a net zero Our approach to lending to
emissions-intensive sectors is • Demonstrate a rigorous approach
emissions economy grounded in principles, clear to governance, strategy setting,
may pose policy, legal, benchmarks and underwriting risk management, and reporting
standards that we apply to all on climate-related risks and
technology and market sectors that we bank. It is based opportunities.
risks to our customers. on a thorough assessment and
We believe that the understanding of the industry
life cycle of the particular sector. Additional criteria are set out below,
most constructive role addressing those activities in the
we can play is to work economy with the largest source
We will: of greenhouse emissions, those
with customers in in the energy system, and those
Support customers in, or reliant on,
emissions-intensive emissions-intensive sectors that:
with deforestation activities in the
agribusiness sector.
sectors, and support them
• Assess the financial implications
as they manage through of climate-related risks and
the transition. opportunities in their business,
including how their strategies
are likely to perform under
various forward-looking
scenarios; and
Climate
Change
Position
Statement
and 2020
Action Plan2.
Action Plan
Support businesses
that manage their
climate-related risks. Energy System.
11 Our approach takes into Coal Mining. However, the International When assessing coal financing
consideration the energy Energy Association’s (IEA) proposals, we balance a number
system’s entire value chain, As of 30 September 2016, modelling indicates that of financial and non-financial
Energy System from energy fuels to power 1% of total Group lending under a two degree scenario underwriting standards
generation. This approach was to mining activities thermal coal demand will peak including reserves, mine life,
enables us to assess how —with lending to coal mining in the current decade and coal type, mining method,
emissions are generated being 8% of the total mining decline thereafter.14 cost of production, access
throughout the energy system. portfolio12 (TCE). to infrastructure, off-take
The level of carbon emissions contracts, environmental
Given their significant There are two main types of from energy generated impact, regulatory requirements,
contribution to emissions, we coal, namely: by burning thermal coal financial performance, quality of
have set guidelines for our coal is dependent on both the management, and track record.
1. thermal coal, used for energy
mining and power generation technology employed by the For thermal coal proposals we
generation; and
financing activities. generator, and the quality of also consider the calorific value
2. metallurgical coal, used for the coal used as its fuel. In this of the coal.
To reach net zero emissions, context quality is determined
steel production.
it is anticipated that the share by its ‘calorific value’ or ‘energy Our lending to customers in the
of thermal coal in the energy Our guidelines relate to thermal content’, typically measured Thermal Coal Sector15 is limited
mix will decrease and power coal as presently there is no in kilocalories per kilogram to those that have a calorific
generation technology substitute for metallurgical coal (kCal/kg). value which ranks in the top
will continue to advance in making new steel. quartile globally (we define
and improve. The use of the highest-quality the first quartile as having a
As an energy fuel, thermal coal in advanced power specific energy content of
coal currently competes with generation technologies enables at least 5,700 kCal/kg Gross
Climate oil, natural gas, nuclear and the least emission intensive As Received16).
Change renewables. Because of its form of power generation from
Position abundance, affordability, and thermal coal. Similarly, utilities
Statement reliability, thermal coal currently employing the more advanced
and 2020 fuels approximately 40% of total generation technologies tend to
Action Plan power generation globally.13 use higher quality coal.
12 Westpac FY16 Investor Discussion Pack, p73. https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/financial-information/FY16_final_presentation_and_idp_asx.pdf
13 IEA, World Energy Outlook 2016.
14 Ibid.
15 Definition: Thermal Coal Sector – Includes coal projects when project financed, or the average of a coal mining company’s thermal coal portfolio when corporate financed, and coal handling
terminals. Diversified mining companies producing a range of commodities will be subject to the same criteria where the revenue derived from thermal coal operations exceeds 30 per cent.
16 Based on the IEA Statistics publications ‘Coal Information,’ 2012, ‘Energy Balances of Non-OECD Countries,’ 2012, and our own calculations.2.
Action Plan.
Support businesses
that manage their
climate-related risks.
12 Energy generation. As the economy transitions,
However, for new thermal coal energy and emissions efficiency • Only support direct lending
proposals we will: Westpac recognises that the will increasingly be key to an existing coal fired
Energy System reduction of the emission determinants of an asset’s generation facility if:
• Limit lending to any new
intensity of electricity networks risk profile.
thermal coal mines or projects —— The facility is required
is critical for the economy to
(including those of existing for system reliability
reach net zero emissions.
customers) to only existing We will: and/or affordability, or is
coal producing basins and We also recognise that the critical to the community
where the calorific value for transformation of the energy • Actively reduce the emissions in which it operates; and
that mine ranks in at least generation sector will present a intensity of our exposure to
the top 15% globally. We the power generation sector —— The lending is not
range of challenges to both new
define the top 15% as having over time; and for the purpose of
and existing generation assets
a specific energy content of at expanding the capacity
and that a balanced approach is
least 6,300 kCal/kg Gross As • Aim to reduce the emissions or extending the life of
important to support an orderly
Received. This value is referred intensity of our power the facility, unless there
transition across the economy.
to as the Newcastle high generation portfolio to is a reduction in the
energy coal benchmark. In considering transactions 0.30 tCO2e/MWh by 2020.17 emissions intensity
in the energy generation of the facility.
In addition to the above
This demonstrates our sector, we take into account
overarching principles, we will:
commitment to playing a the intersecting requirements
of reaching net zero In addition, Westpac
responsible role in supporting • Only finance new power
emissions, affordability, continues to apply the Equator
the transition to a net zero generation if it reduces the
energy security and reliability. Principles18 to all project
emissions economy. emissions intensity of the
Climate We also take into account and project-related lending
grid in which the generator
Change Note that we regularly review the impact of the transition activities, including within
operates; and
Position our underwriting standards on vulnerable households, the power generation sector.
Statement to ensure our activities are regional communities and
and 2020 consistent with an orderly trade-exposed industries.
Action Plan transition, as well as any
technological developments.
17 Target is based on current policy and regulatory frameworks. Note the emissions intensity of the National Electricity Market for the year ending 30 June 2016 equates to 0.90 tCO2e/MWh.
The emissions intensity of Westpac’s power generation portfolio as at 30 September 2016 was 0.38 tCO2e/MWh.
18 The Equator Principles are a risk management framework adopted by financial institutions for determining, assessing and managing environmental and social risk in projects. In 2003,
Westpac was one of 10 global founding signatories.2.
Action Plan.
Support businesses
that manage their
climate-related risks. Agribusiness.
Agribusiness plays a
13 We will:
fundamental role worldwide
in feeding the global
• Support customers in the
Agribusiness population, shaping health
agribusiness sectors that:
outcomes, driving economic
growth, reducing poverty, and —— Are committed to net zero
supporting livelihoods. deforestation by 2020;
We recognise that transactions —— Do not adversely impact
in this sector need to consider High Conservation Value
a range of environmental forests; and
impacts, including reducing
emissions from deforestation —— Do not develop on
and land conversion. areas of high carbon
stock forest.
It is for these reasons we have
committed under both the Further details on this as well
Banking Environment Initiative’s as our broader positions on the
(BEI) Soft Commodities agribusiness sector can be found
Compact, and the New York in our Financing Agribusiness
Declaration on Forests, to Position Statement.
work with other organisations
associated with this sector to
achieve net zero deforestation
Climate by 2020.
Change
Position
Statement
and 2020
Action Plan14
Action plan 3.
Help individual
customers respond
to climate change.
Climate
Change
Position
Statement
and 2020
Action PlanAction Plan. 3.
Help individual customers
respond to climate change.
15 Westpac is committed Despite the commitment to limit We also encourage our
global warming to two degrees, customers to consider how
to helping our climate change will still cause they can improve the energy
personal banking and shifts in weather patterns and and water efficiency of their
increase the frequency and homes in a way that benefits the
investment customers severity of natural disasters.19 environment, while minimising
to understand the Communities may experience the ongoing costs of utilities,
weather events that they are maintenance and repairs.
impact of climate unfamiliar with or for which they
change on their lives. are not prepared. We are aware that both physical
and transition risks from
We recognise that Our experience of working with climate change may affect the
climate change customers and communities performance of investment
through times of natural portfolios to varying degrees
affects our customers, disaster has shown that the across companies, sectors,
their homes and more resilient a community is, regions, asset classes and
investments. We can the quicker it is able to recover. over time. We recognise that
That’s why we are supporting providing more information
use our experience and customers to understand about these climate-related
expertise to assist our how climate-related impacts impacts can assist those
affect their homes and assets, who invest with us to more
customers to prepare helping them make the right accurately assess these risks
and respond to the decisions to prepare for any and opportunities.
possible outcome.
Climate risks and opportunities
Change
Position
they may face.
Statement
and 2020
Action Plan
19 Fifth Assessment Report, IPCC, 2015.3.
Action Plan.
Help individual
customers respond
to climate change.
16
We will:
• Help our customers • Support our customers • Give our customers the —— Continuing to expand
make their homes more to get back on their feet information they need information available to
climate-resilient, improve after experiencing a natural to understand how they our investment customers
energy efficiency and disaster event by: can make climate change to help them understand,
reduce their environmental conscious investments by: assess and manage ESG
impact by: —— Providing disaster relief risks in their portfolio.
packages to customers —— Disclosing the carbon
—— Providing information and communities affected intensity of investment • Continue to advocate for
to assist home owners by natural disasters, when portfolios available more research and investment
identify how they can the events occur; and through BT Financial into helping communities
make improvements to Group (BTFG), and adapt and become resilient to
their home; and —— Providing disaster continuing to evolve climate-related impacts. This
recovery grants to our climate change includes the work we support
—— Working with our bankers community groups disclosures; through the Australian
to ensure customers and small businesses
Business Roundtable on
access the right products 6–12 months after —— Providing environmental,
Disaster Resilience and Safer
and services to help fund an event, to help the social and governance
Communities, which focuses
any improvements they economic recovery (ESG) information on
on natural disaster resilience
wish to undertake. in impacted regions. our investment platform,
and recovery in Australia.
BT Panorama, to help
investors and advisers
Climate assess the ESG risks in
Change their portfolios; and
Position
Statement
and 2020
Action Plan17
Action plan 4.
I mprove and disclose
our climate change
performance.
Climate
Change
Position
Statement
and 2020
Action PlanAction Plan. 4.
Improve and disclose our
climate change performance.
18
Relevant, accurate, Westpac has long committed
We will:
to being transparent about
comparable and timely how we measure and manage
• Disclose our approach to • Continue to refine and
information on where climate-related risks and
addressing climate-related improve the metrics we
opportunities across our
climate-related own business. We believe
impacts in Westpac’s disclose in relation to our
governance, strategy, lending and investment to
impacts exist across this information is relevant
risk management, and carbon-related sectors; and
for shareholders and other
the economy will help stakeholders in assessing the
reporting processes;
• Demonstrate best practice
enhance understanding long-term value of our company. • Advocate for clear, in our own emissions
of climate-related This includes using a
comparable and material management through:
climate disclosures in our
risk in investment science-based approach to
own industry and in other
—— Setting a science-based
setting the direct emissions20 target21 to reduce our
decisions and promote reduction targets for our own
carbon-exposed sectors,
emissions by:
broader financial including working with
operations, ensuring that we
international agencies (a.) 9% by 2020;
system stability. reduce our emissions in line
including United Nations
with the trajectory of reductions (b.) 34% by 2030; and
Environment Initiative Finance
required to meet a net zero
Program (UNEP FI) and the
emissions economy. —— Offsetting any remaining
Financial Stability Board’s
carbon emissions and
Taskforce on Climate-related
maintaining carbon
Financial Disclosures
neutrality across our
(FSB TCFD) and our
Climate business for the life
peers both domestically
Change of this strategy.
and internationally;
Position
Statement
and 2020
Action Plan
20 Includes emissions we generate ourselves (scope 1) as well as the emissions from the 21 Our targets have been prepared using scope 1 and scope 2 methodologies endorsed by
electricity we purchase (scope 2) across all our operations, including our branch network, the Science Based Targets Initiative (SBTI). We are working towards the development of
offices and data centres. a robust method for setting Scope 3 targets for financial institutions with the SBTI, and will
look to use this to develop Scope 3 emissions targets in the future.19
Action plan 5.
Advocate for policies
that stimulate
investment in climate
change solutions.
Climate
Change
Position
Statement
and 2020
Action PlanAction Plan. 5.
Advocate for policies that stimulate investment
in climate change solutions.
20 We know that the 1.
An effective policy provide certainty over We will:
response to climate-related a timeline sufficient to
policy response issues requires a suite of match investment • Continue to provide
information and insight from
to climate change, complementary policies. horizons which are, by
our experience to help drive
nature, long-term; and
both globally 2.
These policies need to be
policy outcomes aligned
(b.) Strategies to increase to net zero emissions and
and domestically, capable of achieving the
resilience and promote support an effective global
will influence the Nationally Determined
adaptation for response;
Contributions (NDCs)
speed of the transition, impacted communities,
that represent each • Work with peer
companies and sectors.
the industries that country’s committed global organisations, industry
reductions targets in the 4.
A broad market-based groups and non-government
will be impacted short and medium term organisations to collaborate
price on carbon is the
and ultimately the and give consideration to most effective, affordable, and share information; and
the long-term target of
economic outcome. reducing emissions to net
flexible and equitable means
• Continue to advocate
of achieving emissions
zero in the second half reductions at the least cost for a broad market-based
For well over a decade, Westpac of the 21st century. price on carbon, as the
across the economy.
has been an active participant most effective, affordable,
in the development of an 3. Policies should consider: flexible and equitable means
appropriate policy response of achieving emissions
(a.) Strategies to
for Australia and New Zealand, reductions, at the least
develop and deploy
and during this time Westpac’s cost, across the economy.
low-emissions
Climate preferred policy position has
technology that
Change remained consistent, comprising
are able to deliver a
Position four core pillars.
clear framework and
Statement
and 2020
Action PlanFor questions and comments please contact Westpac Group Sustainability.
Email: sustainability@westpac.com.au
www.westpac.com.au/sustainability
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