Australian Banks’ Fossil Fuel Financing Under Fire for Methane Oversight
While Australia’s four largest banks – ANZ, Commonwealth Bank (CBA), National Australia Bank (NAB), and Westpac – have reduced their project finance for fossil fuel companies, they still hold billions in overall exposure, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA).
A major concern raised by IEEFA is that these banks are largely ignoring the significant risks associated with methane emissions from their coal, oil, and gas clients. Anne-Louise Knight, IEEFA’s lead coal analyst for Australia, notes that banks recognize methane risks in other sectors but overlook those from their fossil fuel portfolios. Crucially, none of these major banks publicly report methane emission estimates separately from carbon dioxide.
Inconsistent Climate Strategies and Metallurgical Coal Concerns
The report also points out that some banks are basing their climate plans on outdated versions of the International Energy Agency’s (IEA) net-zero emissions scenario. Furthermore, none of the banks have committed to a phase-out date for financing metallurgical coal mining. This is particularly problematic because metallurgical coal mining is, on average, more methane-intensive than thermal coal mining. IEEFA warns that inconsistencies in how banks classify thermal versus metallurgical coal miners further compound this issue, posing additional climate exposure risks. Knight emphasized that methane contributes significantly to global temperature increases, accounting for about 30% of the post-industrial rise.
Recommendations for Banks
To improve their climate efforts, IEEFA recommends that banks:
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Make submission of comprehensive climate transition plans mandatory for all fossil fuel clients.
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Integrate methane emissions into their accounting and client transition plans.
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Require independent verification of self-reported methane emissions from clients in methane-intensive sectors.
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Consider setting phase-out targets for metallurgical coal financing.
Knight acknowledges the “significant strides” banks have made in addressing climate risks and setting decarbonization targets. However, she stresses that these efforts are undermined by “critical shortcomings,” especially the “inconsistent, often inadequate treatment of methane emissions.”
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