Extract from The Guardian
Amid dire warnings for the future of coal, the
lenders signed off on $5.5bn worth of deals for the sector in 2015,
according to analysis by activist group
Coal stockpiles at the Port of Newcastle. Banks’
continued lending to the industry showed they were ‘desperate’,
said Julien Vincent of Market Forces. Photograph: William
West/AFP/Getty Images
Friday 26 February 2016 06.00 AEDT
Australia’s big four banks are continuing to
finance fossil fuel projects despite embracing a 2C or better global
warming target, according to figures from financial activists Market
Forces.
The Commonwealth, Westpac, ANZ and National
Australia Bank signed off on loans totalling $5.5bn to coal, oil, gas
and liquefied natural gas projects in 2015, a figure that is higher
than three of the preceding eight years.
Among the deals were eight loans for coal projects
signed in Australia in 2015, with a total value of $4bn, including
for struggling Whitehaven Coal,
operator of the controversial Maules Creek mine. All of the projects
had some financing from the big four banks, with their contributions
totalling $995m.
“It’s pretty much business as usual for the
big four,” said Julien Vincent from Market Forces.
It comes amid a series of dire
warnings for the future of coal, with consumption declining in
major economies such as the US and China. Last week, Goldman Sachs
forecast that coal may be in terminal decline, with the fall in
demand possibly
being irreversible.
All big four banks have made statements supporting
a 2C target and they have acknowledged the need to play a role in
achieving a shift away from fossil fuels.
After the Paris
climate accord of December 2015, Westpac
went so far as saying it would take “concrete action to ensure
our lending and investing activities support an economy that limits
global warming to less than two degrees”.
ANZ’s
statement acknowledged worries that lending to fossil fuels was
in conflict with the need to reduce greenhouse gas emissions. It
committed to not lend to any new coal-fired power plants that didn’t
use high-quality coal.
The data was collected from public announcements
made by the banks since 2008 and shared with Guardian Australia by
Market Forces.
Vincent said it showed the banks’ actions were
not consistent with statements about climate change because
continuing to exploit fossil fuels would blow the carbon
budget, increasing warming beyond 2C.
Among the $5.5bn of financing from the big four
banks, there were 21 fossil fuel projects, including $300m for the
struggling Whitehaven Coal, which had its loan refinanced by ANZ,
Westpac and the Commonwealth Bank.
Under the new terms, Whitehaven Coal was given a
lower interest rate, despite its share price plummeting to a quarter
of what it was when its controversial
Maules Creek mine was first approved in July 2013.
When the refinancing was announced last year,
Whitehaven Coal’s chief executive, Paul Flynn, was quoted
in Fairfax Media trumpeting the support from the banks as a mark
of confidence in the coal industry.
“For those who think the coal industry is part
of the past, they may need to rethink their views, because that is
certainly not the view of those who have just funded the deal,”
Flynn said.
“To have all the major banks represented in our
syndicate and for them to sign up again, on even better terms than
what we had before, obviously their belief in our business and our
industry is very strong.”
Since that deal was announced less than a year
ago, the company’s share price has fallen 65%. Tim Buckley, an
analyst from the Institute for Energy Economics and Financial
Analysis, told Guardian Australia the banks immediately started
trading the debt in secondary markets and lost 20% on it in the first
few months.
Buckley said the bad performance of that loan was
an “a-ha moment” for the banking industry. He said he was sure
that next year similar analysis would show a drop in fossil fuel
lending but not because of environmental concerns – simply because
they are realising fossil fuels are a bad bet.
“The financial markets have realised that [the
Paris accord] was a massive aha-moment for everyone … They are
saying, ‘Look, we know that policy action globally is inevitable,”
Buckley said. As a result they were beginning to be more cautious
about financing fossil fuels and that would be reflected at the end
of this year, he said.
In response to the Market Forces figures, the big
four banks all sent statements to Guardian Australia emphasising
their lending to renewable energy projects.
Westpac
and the Commonwealth
Bank provided links to some publicly available data on their
exposure to the fossil fuel industry but it was not possible to
compare the figures over time or against other banks. ANZ
has similar data available.
ANZ said that since 40% of the world’s energy
comes from coal and it remains the cheapest fuel, a transition from
coal needed to be “managed responsibly over time”.
NAB said that, to secure Australia’s energy
needs, renewable energy will play an increasing role but “fossil
fuel will continue to be a major energy source for the foreseeable
future”.
The big four Australian banks were involved in 70%
of the deals but were not alone in financing coal, gas and LNG
projects. Their deals made up a quarter of the $22bn in loans to
fossil fuel projects that were signed-off on in 2015 from both
Australian and international banks.
The biggest lenders to fossil fuel projects in
Australia were Japanese banks, with three closing deals with combined
values of between $2.2bn and $2.9bn in 2015, pushing the big four
lower in list of top 10 lenders to fossil fuels.The figures do not
give a complete picture of how much the banks are lending to fossil
fuels overall – their “exposure” – because many of the deals
that were signed were refinancing, so are not necessarily increasing
the amount of money lent to fossil fuel companies. Refinancing is a
process where one loan is replaced with another under new terms.
But Vincent said while banks were starting to
become more transparent, they still did not provide enough
information for shareholders and other stakeholders to calculate
their overall exposure to fossil fuels over time and compare them.
Vincent said that refinancing can also extend the
length of a loan, or improve its terms, so refinanced deals are not
always simply a continuation of the status quo.
“And in light of statements supporting a move
away from fossil fuels, banks could always choose not to refinance a
loan,” he said. “The Whitehaven deal is a good example. Any of
the big four could have turned around and said ‘all those activists
climbing on your project and delaying it, and the decline in share
price, it’s just too hot to handle and we’re going to exit
this’.”
“The banks are desperate to stay in a position
of business as usual. What this shows is an intent and a willingness
to stay involved in the industry and to be exposed to it.”
Vincent pointed out some banks have done exactly
that on Abbot Point, leaving continuing doubts about whether the
project could receive the loans it needs to proceed.
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