27/12/2020

(AU) Climate Of Change Puts Business And Coalition At Odds

Sydney Morning Herald -  Nick O'Malley | Mike Foley

The energy analyst Tim Buckley keeps a working folder on his computer in which he tracks announcements made by major financial institutions that are no longer insuring, lending to, or investing in, companies that are heavily engaged in coal.

In 2018 Buckley, who works for the pro-renewables Institute for Energy Economics and Financial Analysis, noted 31 major outfits abandoned coal.

In 2019 the list was a third larger again, with 46 major outfits dumping coal.

This year Buckley noted 68 exclusions and calculated that the number of announcements per week had more than doubled from 0.6 to 1.4.

The community has increasingly come to view a “net-zero” future as “the only safe future” and companies and investors are now responding to that. Credit: Glenn Hunt

The trickle had become a steady flow by mid-year and by year’s end a flood, says Buckley, with governments themselves following the path away from fossil-fuel heavy investments trodden first by investors.

Last Friday, Boris Johnson, who is busy making common ground with US President-elect Joe Biden over climate, announced Britain would not support any new international projects in oil, natural gas or thermal coal - which is burned to generate electricity.

At the global Climate Ambition Summit hosted by Britain, France and the United Nations the following day (from which Australia was excluded from speaking) Pakistan announced it would build no new coal power plants.

Energy analyst Tim Buckley has charted the number of financial institutions who no longer back companies involved in the coal industry.
On Monday another of South Korea’s top four banks, Woori, announced it would cease lending to coal interests and begin to “retrieve” capital already invested in coal as loans expired or came up for renewal.

Also on Monday Canada’s Scotiabank became the fifth and last major bank in that country to announce it would no longer fund drilling in the Arctic, prompting Buckley to note that coal exclusion is increasingly extending to other fossil fuels.

“They used to carve off coal and throw it under the bus,” he says of the institutions. “It’s more common now to see oil and gas get chucked under too.″⁣

Anna Skarbek is a former investment banker who is now executive director of the non-profit climate change advisory ClimateWorks Australia.

Skarbek says she has detected a shift in culture and perspective from Australian boardrooms this year.

Where once the Environmental, Social and Corporate Governance issues (ESG refers to how companies or investors measure the social and sustainability impact of investments) may once have been seen as fringe, they are now viewed as critical.

Skarbek says that either in conjunction with the response to the pandemic or in parallel, society has made it clear to business leaders that it draws certain lines and demands certain behaviours. Business leaders, she says, have heard.

ClimateWorks chief Anna Skarbek appearing at the Financial Review Energy and Climate Summit last month. Credit: Louie Douvis
According to Skarbek, corporate Australia was shocked by the Juukan Gorge incident in Western Australia, in which Rio Tinto proved incapable of measuring the monetary value of a sacred site and destroyed it for profit.

An act like that would now be unthinkable, she says. Similarly the community has increasingly come to view a “net-zero” future as “the only safe future” and companies and investors are now responding to that.

But the shift in corporate attitudes has not been reflected in federal government circles. Australia remains the only developed nation not to have committed to a mid-century net-zero emissions target, and some cabinet members are determined to push back against capital flight from fossil fuels.

This week in federal parliament an inquiry was launched to question banks and insurers over their plans to reduce support for new mines and coal-fired power plants due to global warming.

The inquiry will be led by climate change sceptic and Nationals MP George Christensen, who chairs the Joint Standing Committee on Trade and Investment Growth.

Resources Minister Keith Pitt backed the inquiry, arguing strong demand for international coal would continue and criticising the situation which had emerged where mining-related businesses like ports, engineering and mechanical can’t get “indemnity insurance because you might work in a coal mine for part of your work”.

However, chief executive of the Investor Group on Climate Change Emma Herd says it’s unlikely the government can reverse the trend of financial institutions phasing out support for high-emissions industries and climate-sensitive industries.

“The global financial sector’s appetite for both high-emitting and climate-sensitive industries is moving fast and it will impact those companies’ ability to access capital,” Herd says.

Prime Minister Scott Morrison with Resources Minister Keith Pitt in June. Credit: Alex Ellinghausen
“COVID-19 has accelerated the movement. Economic disruption has meant the finance sector, which previously took an incremental approach, is taking big steps out of industries with climate risks, because cheap monetary settings have created the opportunity to move quickly into new industries.”

Financial support for coal in particular has become a flashpoint in Canberra in recent months, particularly after ANZ’s October climate policy announcement.

It is directing its 100 biggest emitting customers in energy, transport, building, food and agriculture to work with it to develop a plan to “establish or strengthen low carbon transition plans”.

The National Party came out swinging. Agriculture Minister David Littleproud said “banks are not, and should not try to become, society’s moral compass” and Deputy Prime Minister Michael McCormack said a bank forcing industry to report their emissions was “sheer virtue signalling”.

Climate policy and the coal industry have become a proxy test for McCormack. Some in the party who are agitating for leadership change appear to set an impossible task to build new coal power plants and drop support for renewables.

Senator Matt Canavan and New England MP Barnaby Joyce promoted government support for coal when they toured the Hunter Valley in November. They also criticised the NSW government’s energy road map to dramatically boost renewable energy generation ahead of the planned rolling closures of coal plants starting with the Liddell power station.

But financial regulators have recognised companies need to get serious about climate risk to their investments.

In November Australia’s finance sector, including big insurance companies, major banks, and superannuation funds, endorsed a policy to deal with climate change and other sustainability issues.

Finance regulators the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority have endorsed the road map.

Herd says the Australian Sustainable Finance Initiative (ASFI) road map showed the sector was “going to push hard into more sustainable industries”.

“ASFI is all about how to do the knitting of the finance sector. If the government says to the finance sector ‘stick to your knitting on climate change’, ASFI is the sector’s way of saying this is our knitting.”

Jacki Johnson, co-chair of AFSI says the road map was “seeking to re-orient capital – where capital is lent, what it insures and where it is invested”.

Outgoing executive board member at the Australian Prudential Regulation Authority Geoff Summerhayes said last month Australia’s financial system was already responding to threats from climate change.

“Financial regulators recognise the material risk presented by climate change for the finance sector, and are acting to support the industry as it addresses these risks and also the opportunities where they occur,” Summerhayes said.

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