Guest essay by Eric Worrall

Australia’s big banks have defended their moratorium on financing Aussie coal projects, claiming they are required by international regulatory bodies to which Australia is a signatory to consider their “climate risk” exposure.

Australia’s big banks reject Nationals’ claims managing climate risk is ‘virtue signalling’

Major banks say Australia’s international trading partners require the sector to identify and disclose climate risk on their balance sheets

Katharine Murphy Political editor @murpharoo
Fri 21 May 2021 03.30 AEST

Australia’s big banks have declared they need to actively manage climate risk because governments and regulators require it, and because the investor community is “increasingly transitioning its focus towards a net-zero emissions economy”.

The banks and the ABA point out current carbon risk practices – namely, disclosing information relating to climate exposures and calculating the potential risk of climate change on their balance sheets – are requirements driven by international governance setting bodies, of which Australian regulators and Australian companies are members.

The parliamentary inquiry, chaired by the Queensland National George Christensen, was triggered by a public commitment from ANZ to step back from business customers with material thermal coal exposures – market signalling that sparked consternation from the Nationals.

In the wake of the ANZ fracas, the resources minister and Queensland National Keith Pitt originally instructed the joint standing committee on trade and investment growth to grill financial regulators, the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority, as well as the banks, about their plans to pull back on lending or insuring mining projects because of climate change.

Some fossil fuel producers and their contractors in Australia have used submissions to the inquiry to argue it is now harder to get finance because major global investors and insurers are actively reducing their exposure to risks from the climate crisis.

Read more: https://www.theguardian.com/australia-news/2021/may/21/australias-big-banks-reject-nationals-claims-managing-climate-risk-is-virtue-signalling

The National Party, which appears to be driving official inquiries into bank discrimination against fossil fuel miners, is the junior party in the coalition which has controlled the Australian federal government since 2013. The voter base of the Nationals tends to be rural and mining districts.

There are other sources of funding miners can turn to. The reluctance of banks is a potential opportunity for retail investors. Lets not forget, the share market was created by people who wanted a means of raising finance for projects which banks wouldn’t touch. There is nothing stopping mining companies from say issuing shares whenever they want to develop a new project, then buying back those shares using profits from said project. They might even find the flexibility of such arrangements better suits their business models.

As for the banks, given mining and farming are the big business in Australia, banks cutting themselves off from a large chunk of mining income doesn’t seem a long term recipe for boosting profits. So long as miners can access funding by some means, I really don’t care what banks do with their time and money. Let bank management answer to their shareholders for any stupid decisions they make regarding their lending practices.

via Watts Up With That?

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May 21, 2021