It’s exciting to see Westpac taking a leadership position on climate change. Last year the company announced its updated Climate Change Action Plan. It recognised that a financial institution’s footprint is about the wealth it wields, not just the operation that wields it. It included a $10 billion target for lending to climate change solutions by 2020 and $25 billion by 2030. The bank also limited its financing of coal projects to the most efficient 15% in existing coal producing basins.
The latter doesn’t rule out coal entirely. But it was radical enough to enrage some in the company's native Australia. Among other things, this meant Westpac wouldn't help fund the proposed Carmichael mine, set to be the biggest in Australia if it goes ahead.
Westpac declared $95.7 billion in assets in New Zealand last year, which reflects significant influence across the economy. So it is encouraging to see it stepping up to the climate change debate on this side of the Tasman too.
Westpac is the only NZ bank that regularly publishes its lending exposures to both businesses providing climate change solutions and those involved in fossil fuel extraction and production. The bank lists its lending to ‘green businesses that are helping to provide solutions to climate change’ at $1.5 billion. And it aims to increase that to $2 billion by 2020. The bank says it has also cut lending to companies involved in fossil fuel extraction and production by 55% since 2012.
The new report was created by EY and Vivid Economics, and released on April 4. It includes scenarios for doing our bit to keep global warming to less than two degrees Celsius. It reveals the benefits of acting quickly.
David McLean is Westpac NZ Chief Executive. He said: “This research demonstrates the importance of taking immediate steps to cut our greenhouse gas emissions. The alternative is waiting and taking action later. But that is likely to require more drastic changes in behaviour, and over the long-term hit people harder in the pocket.”
The first scenario involves an earlier and smoother transition to a lower carbon economy. In the other substantive action to reduce emissions is delayed for more than a decade. A key difference is when we include agriculture in the NZ Emissions Trading Scheme. Other factors included improvements in technology, the purchasing of carbon credits and the rate of afforestation.
The modelling indicates the economy would benefit by $30 billion by 2050 if government, businesses and households get a move on.
David added: “If we wait to take action on climate change it may mean a very slightly healthier economy in the near term. But this gain would be lost in future as emissions-intensive sectors were forced to play catch up.”
The report also includes an account of the physical threats posed by climate change to five key sectors.
Agriculture and tourism stand to be disrupted by climate events. Forestry would be at risk of wildfires. Electricity and transport could be challenged to further reduce emissions, but could also experience greater demand.
Westpac has been a member of the Sustainable Business Network since 2010. It sponsored the Sustainability Superstar category of the 2017 NZI Sustainable Business Network Awards.
Rachel Brown is SBN’s CEO.
“It’s fantastic to see the financial sector taking this on," she says. "It’s another signal that the smart money is on a rapid transition to a low carbon economy.
"The report starts from the positive assumption that New Zealand will meet its Paris commitments. Unfortunately, right now this is far from certain. The calculations confirm that we have to get our house in order as fast as possible after a disappointingly slow start. That means facing up to our responsibilities on agriculture without further delay."
At the same time the Ministry for the Environment released a new report Climate Finance Landscape for Aotearoa New Zealand. It aims to redirect capital flows in New Zealand to a low carbon economy. Launching the report, Climate Change Minister James Shaw said we are now seeing a shift in climate change being viewed as a cost to an investment.
“We need to start seeing climate change as economic issue with environmental consequences rather than the other way around,” he said.
It is to be hoped the two reports indicate the willingness and understanding needed to make the changes needed to the way we invest in our world.
7 Key findings from the Westpac report
- The physical implications of climate change are not evenly distributed across New Zealand’s economic sectors. Transport, electricity, and agriculture are particularly likely to be impacted.
- Climate change’s physical impact could be felt by sectors already under pressure in the transition to a two-degree economy.
- Agriculture is most exposed to the increased frequency of droughts and extreme high temperatures.
- Transport is vulnerable to higher temperatures, flooding, and sea level rise.
- The electricity sector could suffer from temperature and sea level rise. Storms and wind could also be a factor.
- New Zealand’s forestry could be significantly impacted by bushfires.
- New Zealand’s tourism sector could be affected by sea level rise, more extreme temperatures and rainfall.