Greenpeace response to reaction from banks

ANZ have published a document on their website detailing their response to our work. We have addressed the points they make below.

Read the ANZ statement in full.

ANZ: Greenpeace is protesting against our involvement in the Australian coal industry. We are the banker to a number of Australian companies involved in the coal sector and have met with Greenpeace and other stakeholder organisations several times over the past several months to hear and better understand their views.

1. GP: We are specifically protesting about ANZ's refusal to rule out financing new coal power stations in Australia. Given its historical role as the largest financer of coal power, we think it needs to make a clear commitment not to finance a new generation of polluting coal plants.

ANZ: We recognise the importance of playing a role in supporting Australia transitioning to a lower carbon future. This transition will take time and will require significant investment in new sources of energy.

1. GP: The transition to a low carbon future will certainly take a long time if banks like ANZ continue to finance the construction of new generation of polluting coal power stations.

ANZ: Eighty per cent of Australians currently rely on electricity generated from coal-fired power stations to run their households and businesses and tens of thousands of Australians across many metropolitan and regional communities work in the energy industry.

1. GP: Which is why Australia has the highest per capita greenhouse emissions in the world and our electricity system is one of the dirtiest on earth. It is only going to get cleaner if we stop building new polluting power stations and build clean ones instead.

   Building renewable energy will create many more jobs than building new coal plants. ANZ's rhetoric about households, tens of thousands of Australians and jobs is actually just a manipulation to make it sound like it cares about something other than the $5billion profit it recently announced.

ANZ: We continue to support our coal industry clients and also our clients in the growing renewable energy sector. While renewable energy availability is developing, it will be some time before it may provide electricity to affordably support our economy.

1. GP: It will take a lot longer for renewable energy to affordably support our economy if governments continue to exempt the coal industry from having to pay for their environmental damage, and if major banks like ANZ continue to finance new coal power stations.

   The cost of renewable energy continues to fall, while the cost of fossil fuels continues to rise. Finance is an important cost in establishing new energy projects, so banks have a crucial role to play in driving the transition to renewable energy.

ANZ: Renewable energy projects currently represent a third of our project finance power portfolio and we are a leading renewable energy financier. Projects we support include wind power as well as landfill gas, waste coal seam methane, hydro and geothermal power stations.

1. GP: It is great that ANZ has invested in renewable energy projects. We encourage it to do a lot more. For these investments to be truly beneficial, ANZ needs to also rule out financing new coal power stations.

ANZ: Australian Governments at Federal and State level continue to support the coal sector due to the critical role it plays in ensuring the reliability and security of energy that is the backbone of our economy.

1. GP: The "coal sector" includes coal mining, coal export and coal power stations. Most coal mining is for export. Governments continue to support the expansion of coal exports because of the royalty payments they receive and because the coal industry is one of, if not the most, powerful lobby group in Australia. ANZ has a close relationship with many of Australia's biggest polluters, and it is clear that it wants to maintain this relationship.

   It is important to remember that we are not asking ANZ to divest all of its coal investments. We are asking it to commit to not finance new coal power stations in Australia. This should be simple.

ANZ: The Australian Government is also committed to reducing the emissions intensity of the coal sector and has flagged strict emissions standards that will be applied to any new coal fired power generation station.

1. GP: In the lead up to the 2010 election, Julia Gillard announced the intention to introduce an emissions standard for new coal power stations. The problem is that she has set the starting point for discussions about the standard so high that most of the proposed new coal power stations in Australia would easily meet the new standard. Greenpeace will engage actively at a political level to ensure that the proposed new standard is effective in ruling out new polluting coal plants but at this stage we do not want to rely on a political process alone.

ANZ: We are working with our clients, with governments, and with stakeholders to support our economy while transitioning to a lower carbon future. The support of stakeholders is vital to ensure affordable electrical power is available to grow our economy, run our homes, and support critical community services like hospitals and public transport.

1. GP: This statement is a load of manipulative rubbish and is hardly worthy of a response.

   Our request of ANZ is simple. We are asking that it rule out financing new coal power stations. We are not asking it to pull out of its many investments in existing coal infrastructure.

   Australia does not need new coal power stations to meet our energy needs. In fact, if we were serious about climate change, we could start replacing existing coal power stations with renewable energy today. ANZ knows this just as well as we do.

   ANZ says it is up to governments to regulate. Greenpeace agrees that governments should regulate, but we also think that major companies have a responsibility to be good corporate citizens.

   ANZ made $5billion in profits in 2010, and are one of the most powerful institutions in Australia. It has won many sustainability awards. We think ANZ has an obligation to the Australian community to put its money where its mouth is and rule out providing finance to new coal power stations.

The Commonwealth Bank have published details on their website detailing their response to our work. We have addressed the points they make below.

Read the Commonwealth Bank statement in full.

GP: The Profundo report commissioned made every effort to draw on all publicly available information. Much of the data relating to financial transactions is not publicly available and it is therefore inevitable that the research is incomplete. For this reason, the report is likely to have under-reported the total finance provided by Commonwealth Bank (and other banks) to the coal industry and also possibly the renewable energy industry.

Whilst conducting our research we found that each of the major banks discloses information about energy financing in different ways.

We found that Commonwealth Bank discloses the least amount of information of any of the big four, which has made the task of compiling investment information, and cross referencing it, quite difficult.

If the Commonwelath Bank is able to provide us with the details of the in exposure to both the coal industry and investments in renewable energy that demonstrates there is cause to adjust our findings then we will update our report. At this stage we don't believe that their comments provide sufficient information to warrant this.

In relation to the specific points that CBA raised, each is have addressed each in turn.

1. CBA: The Profundo report estimates a total five-year investment of just $77 million to the renewable energy by the Commonwealth Bank. The Commonwealth Bank has invested $100 million in renewable energy in 2010 alone.

   GP: The research was commissioned in April 2010 and only investments made up until July 2010 are included. If CBA made renewable energy investments since that date they will not have been included in the report.

   Due to the lack of disclosure by the banks it is not possible to fully investigate the financing made to the coal industry and the renewable energy industry.

   If CBA provide details of transactions that are missing, we can include them in an updated version of the report, however to maintain a fair comparison we would ask that they disclose those figures for both the renewables and the coal sector.

2. CBA: Figures in the report include several refinancing transactions. This means that some financing transactions are effectively double and triple counted and therefore are not accurate.

   GP: We made a decision to include refinancing in our calculations. There are various pros and cons to this approach, but we believe their inclusion provides the most accurate picture of a banks policy towards an industry.

   Refinancing is always a deliberate choice of a bank. When a loan is due for refinancing the bank can decide to withdraw its money, or choose to invest again in the same company. For that reason, where the original loan was undertaken prior to 2005, but the decision to refinance the loan falls within our reporting period the loan is included in our report.

   In some cases the bank is refinancing a loan which was originated within the reporting period. In this case, there is indeed a risk of double counting. However, due to the lack of public information about these transactions, it is often very difficult to determine for each individual bank how much is exactly refinanced. This is because exact refinancing of loans are very rare: often the amount is increased or reduced, some banks drop out of the syndicate and others step in, and the proceeds of the loan are often only partially used for refinancing and partially for new investments.

   The methodology was applied evenly to all banks investigated as part of the report. We applied the same methodology to coal and renewable investments, so there should be no significant influence on the comparison between the two types of investments.

   In addition, in practice there are not that many cases in which amounts might be double counted; and the actual investments are always under-estimated, because we only know about investments made by banks in banking syndicates and through investment funds. There is very little disclosure of investments made by banks in one-to-one loans to companies, private equity and private banking investments, and hence these are missing form our total figures.

   If there are specific transactions that Commonwealth Bank think result in a clear case of double counting, we would be happy to discuss these with them and would consider making amendments to the report accordingly.

3. CBA: The report's classifications of Bank financing to the New South Wales and Queensland Governments as 'coal' related.

   GP: We assume that there is a disagreement with the methodology that we have used however it is not clear what the specific concerns are. We note that the methodology Profundo used is the same used by at least one other major bank in estimating their exposure to coal generating investments. The methodology used by that bank states that for indirect financing…"The level of indirect financial exposure has been apportioned from total exposures reflecting the proportional value contribution of the energy generation business of each organisation and the relative proportions of the different types of energy generation within each organisation."

   Given the significant role of state owned generators, it would not be realistic to exclude them.

4. CBA: The Commonwealth Bank does not currently have any direct investments in the construction of any new coal fired power stations.

   GP: Greenpeace sees this as positive, however Commonwealth have stopped well short of saying that they will not finance new coal power stations at some point in the future. We strongly encourage the Commonwealth Bank to adopt a clear policy of not financing the construction of new coal fired power stations in the future.

5. CBA: The report includes transactions from 2003, despite the report stating it only covers the previous 5 years.

   GP: Greenpeace asked Profundo to review this transaction. In doing so, Profundo agreed that there was in fact one figure from 2003 that should not have been included. However, in reviewing this, they also uncovered some further transactions that had been overlooked. The net result raised the overall figure reported for Commonwealth Bank financing of coal fired power stations while decreasing the figure for coal mining. We have updated the Profundo report to reflect the new figures and the revised versions of both the full report and the summary are now available here.

Greenpeace remains willing to continue discussions with the Commonwealth Bank, and with other banks, about the report and about the financing of new coal power stations.

Our ask is simply that banks make a commitment not to finance new coal power stations in Australia. We think it makes economic sense, and we think the banks have an ethical responsibility to the Australian community, and to future generations, to rule out financing new coal.

The NAB have yet to publish a response on their website but we have received emails from them. This is our response to those emails.

NAB: NAB has in place a number of policies and procedures that address environmental risk, particularly for sensitive industries. This includes assessments of projects for compliance with relevant Australian and State Government environmental standards.

1. GP: Greenpeace of course welcome the fact that NAB complies with government standards. It would be concerning if it did not. The point is that NAB's policies to address environmental risk in sensitive industries are not sufficiently explicit to rule out investment in new coal power stations. Given that NAB played a key role in the financing of the most recent new coal power station built in Australia (Bluewaters II in Western Australia, which was only commissioned in late 2009), generalised statements of ‘addressing environmental risk' are not sufficient to provide confidence that it won't invest in more new coal plants.

NAB: NAB has also been a signatory of the Equator Principles since 2007. These principles require that relevant project finance deals undertaken by NAB must undergo an environmental impact assessment. As part of this process NAB assess each project and goes through a range of risk and due diligence procedures to ensure compliance with the Equator Principles.

1. GP: The Equator Principles are loose guidelines and do not stop banks investing in projects that are environmentally damaging. We think it's not too much to ask for NAB to adopt a clear policy not to provide finance to new coal power stations. It already has similar policies that prohibit investments in nuclear power and brothels.

NAB: It should also be noted that NAB is the leading arranger of project financing for wind energy projects in Australia. This investment has helped develop and fund a range of renewable energy projects in Victoria, South Australia and Western Australia. This year alone NAB was involved in the financing of approximately 595MW of renewable power generation projects in Australia and our objective is to continue to increase this commitment as further renewable energy financing opportunities emerge in the future.

1. GP: Greenpeace welcome the role that NAB has played in financing renewable energy projects and are glad to hear that it has an objective to increase its financing of renewables. However, looking at total financing over the last five years, Profundo found that NAB invested around seven times as much in coal infrastructure (over $1billion) than in renewables ($140M).

   If NAB would commit not to finance new coal power stations, the balance of its overall project finance would shift from coal to renewable energy – which appears to be its intent.

NAB: In regards to our own operations, NAB has done a great deal of work in recent years to reduce our impact on the environment including achieving carbon neutral status for the bank earlier this year.

1. GP: This is also commendable and we acknowledge the hard work of many NAB staff members in reducing the impact of their operations, however the environmental impact of lending decisions can far outweigh the direct environmental footprint of a bank's physical operations.

   Greenpeace encourage NAB to rule out financing new coal power stations. We think that this position is consistent with the spirit of their existing policies, is consistent with the expectations of bank staff and customers, and is consistent with NAB's public positioning on climate change and sustainability.

Late last year, Westpac announced a new "financing sustainable energy" policy. While this is a much clearer and stronger statement than any of the other major banks, it still falls short of clearly ruling out financing of new coal power stations.

Read the Westpac statement in full.

Westpac have also published a response to our campaign on their website. We have addressed the points they make below.

WP: The Westpac Group supports the development of an efficient, affordable, safe and secure energy system for the future that recognises and addresses the need to reduce carbon emissions.

1. GP: Excellent! Greenpeace supports this too. It is one of the key objectives of our energy campaign.

WP: While we have in place a number of committed arrangements with long-standing coal-industry customers, our focus is on funding clean energy and energy efficient projects to help the transition to a low carbon economy. This includes a renewable energy strategy: in 2009, more than half of our energy financing in Australia and New Zealand was for renewable energy sources. We publicly report changes to this figure in our Annual Review and Sustainability Report published in November each year.

1. GP: From the Profundo research, it appears that Westpac has been the largest financers of renewable energy projects in Australia. It also has the best reporting of the impact of its lending of any of the big four banks.

   It appears Westpac sees that the future lies in renewable energy, but it can't quite commit to not finance new coal power stations.

WP: Additionally, over the past year, The Westpac Group has also finalised a review of our risk and credit policy, which explicitly considered environmental, social and governance aspects and covers all business lending activities.

1. GP: What we are asking for is that Westpac makes explicit in its credit policy that it will not finance new coal power stations. We think it is not a difficult ask given the financial risks and reputation risks surrounding new coal.

WP: Our approach builds on our early leadership as one of the first signatories to the Equator Principles, a financial industry benchmark for determining, assessing and managing social and environmental risk in project financing.

1. GP: The Equator Principles are loose guidelines and do not stop banks from investing in projects that are environmentally damaging. We think it's not too much to ask for Westpac to adopt a clear policy not to provide finance to new coal power stations. It already has similar policies that prohibit other investments it deems to out of line with community expectations.

WP: We continue to work with Government and our customers as regulatory frameworks around the introduction of carbon constraints firm up in the jurisdictions where we operate. We have also discussed these issues with a range of environmental organisations including Greenpeace and continue to consult with them on our approach.

1. GP: We continue to have a constructive dialogue with Westpac on this issue. However, despite making strong statements about the need for climate action, and expressing a clear intention to shift their investments towards renewable energy, Westpac has so far refused to rule out financing new coal power stations.

   Given its important role in financing the newest coal power station in Australia (Bluewaters II in Western Australia), we think that Westpac needs to be more explicit about its energy finance policy and clearly rule out financing new coal power stations. We think this would be consistent with its public reputation on sustainability, and would be consistent with the overall direction of its sustainability policy.