Banks suspected in AGL's climate foul play

Despite pledging support for climate action, it's possible one of Australia's big four banks is coming to the financial rescue of pollution giant AGL, writes David Ritter.

A REAL-TIME “whodunnit?” is playing out across the Australian banking industry. At least one of Australia’s big four banks is considering loaning $800 million to the nation’s worst domestic climate polluter, AGL. The question is, who is involved? And why?

Trust is the foundation the banking industry is built on and Australia’s big banks are still recovering from the reputational hammering administered by the 2019 Banking Royal Commission.

In this season of Annual General Meetings for Australia’s big four banks, climate change has emerged as an acute test of business integrity. Yesterday, Westpac was the first to experience irate shareholder interrogation.

ANZ, NAB, CommBank and Westpac have all pledged their support for the Paris Climate Agreement – now supplemented by the Glasgow Climate Pact – but for banking reputations to improve, actions must match words. For despite their lofty climate commitments, recent Greenpeace analysis has shown that the big four banks have climate policies that are flimsy at best, with significant loopholes for fossil fuel lending.

AGL is leading the way in harmful coal pollution

With sinking coal profits and a position as one of Australia's leading polluters, energy giant AGL is rethinking its business strategy.

The International Energy Agency has laid out a pathway for the world to have some chance of keeping global temperature rise to less than 1.5 degrees which contains a range of clear milestones. These include no new gas, coal or oil extraction projects from this year and in the developed world, closing all coal-burning power stations by 2030.

From this, the fundamental trust question for Australia’s banks on climate becomes: will they conduct their business operations in a manner that is consistent with their stated pledges? Or fall back on the climate loopholes and caveats in their lending policies? In this respect, AGL offers a crucial test of credibility and integrity.

AGL is currently planning to burn and mine coal until 2048, which by any stretch of the imagination is wildly inconsistent with what is necessary for the world to have a chance of achieving the Paris climate goals.

Rather than pursuing a forward-thinking business strategy, the AGL Board – which has admitted to having failed to stay ahead of industry trends and overseen massive shareholder losses – is pursuing a demerger strategy. Under the demerger, AGL Energy would become Accel Energy Limited and then Accel Energy would demerge a new entity, AGL Australia Limited, which would retain the AGL brand.

So, the dirty, polluting, ageing, environmentally-poisonous, coal-burning power stations would go to Accel Energy, while the more forward-looking assets would go to AGL Australia. The banks come in because Accel Energy (or “Crapco” as I’ve heard it nicknamed) would require $800 million of initial borrowing to ensure business viability.

AGL keeps coal burning as business suffers

The Chairman of AGL Energy has admitted that the company is failing to meet emissions targets as share value continues to plummet.

No bank can credibly claim to support the Paris Climate Agreement and loan $800 million to a demerged coal mining and burning company that plans to continue its toxic ways for almost three more decades. There isn’t a loophole in the world big enough to slip that one through.

AGL is best known as an electricity generator (more than 80 per cent of which comes from burning coal) but what is less remembered is that the company also mines coal for use in its Loy Yang A Power Station.

So the question for the big four banks is pretty clear: can we trust your word or not?

Memo to NAB’s Ross McEwan, ANZ’s Shayne Elliott, CommBank’s Matt Comyn and Westpac’s Peter King — if you plan to loan money to AGL’s climate-toxic demerged entity Accel Energy, enabling it to keep on belching out coal pollution until the late 2040s, then you are showing a distinct lack of trustworthiness. In fact, you are showing blatant disregard for the safety of future generations — including our kids who are alive, right now.

Outside of AGL, there are other major climate tests for the banks, associated with other major polluters like Woodside, Whitehaven and Santos.

AGL takes Greenpeace to court over climate campaign

Coal industry giant AGL attempts to silence Greenpeace for exposing its devastating ongoing damage to the environment and human health.

Every major financial institution that is serious about its commercial reputation and social licence to operate needs to plan for exiting all exposure to coal, oil and gas – the number one drivers of the climate emergency – as quickly as possible, while shaping new business around the imperative to rapidly shift finance to renewable energy and other climate solutions.

According to its website, NAB is the number one arranger of renewable energy project finance in Australia. If it is still funding dirty, polluting entities like AGL though, this commitment falls flat.

In yesterday’s Westpac AGM, Board Chair John McFarlane refused to comment on specific projects or businesses, but has been reported as saying it would be an “easy decision for this board and this bank to cease all fossil fuel exposures and put this issue out of the way”.

If it would be an easy decision to make, then there is no reason for Westpac and Australia’s other big banks to simply keep their words and get on with it.