Aussie Banks Grilled on “Climate Virtue Signalling”

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.

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Drake
May 20, 2021 10:50 pm

The Golden Rule: He who has the gold makes the rules.

In today’s “modern” world all currency originates in central banks of from the government.

Central banks only “loan” the created from nothing money through acceptable banks.

Possibly a major electoral change in governance could cause these banks, who are refusing to lend to certain businesses, to be unacceptable for those loans.

Of course the best end result would be the return to asset based currency, eliminating most of the problems with boom and bust cycles caused by central banks. Not the cycles themselves, they happen by the nature of economics, but the great lengthening of those “bust” cycles. As an example, the “Great Depression” of the 1930s and the “Great Recession” of the 2010s in the US. Neither could have lasted so long without the interference of the Fed.

Observer
Reply to  Eric Worrall
May 21, 2021 4:37 am

There are two types of deflation – one where prices for goods and services becomes lower over time, and the other where the money supply shinks.

You get gentle deflation of the 1st sort under the classical gold standard because the production of most goods and services tend to become more efficient over time relative to the supply of money. This is harmless and doesn’t lead to hoarding of money, because people’s time preferences mean the want a replacement kettle now rather than go kettle-less for a year in order to save a few percent on the purchase price.

You don’t get monetary deflation under the Classical Gold Standard for the same reason you don’t get inflation: because gold’s inelasticity of supply (its stock increases by 2 – 3% per annum through mining).

The deflation of the 30’s happened after a decade and a half of monetary (well… currency, ie credit) inflation under the “Gold Exchange Standard” which was brought in as a bankster-friendly attempt to impose some monetary discipline after the Classical Gold Standard was ended in 1914 so governments could pay for The Great War by printing money.

People who criticise gold tend to like the period during the Bretton Woods agreement, which is ironic because that was a kind of gold standard, and it’s only after that ended in ’73 that we’ve seen the disastrous decrease in interest rates and financialisation of everything.

Mark
Reply to  Eric Worrall
May 21, 2021 8:58 am

I’m banking (or rather NOT banking) on that…

Patrick MJD
May 21, 2021 12:31 am

It’s not just the banks, it’s everywhere. Beer making (VB), every energy retailer, insurance, superannuation, health, retail, you name it.

Tom Abbott
Reply to  Patrick MJD
May 21, 2021 5:44 am

Everything is infected with the CO2 craziness. Based on nothing but unsubstantiated claims about CO2 and the Earth’s atmosphere.

All these alarmists are divorced from reality. It’s pretty amazing to see just how easy it is to fool people, even smart people with mere rhetoric. I think in these cases, the intellect takes a back seat, and the emotions take control, and cause people to see things that are not there. The “herd instinct” is strong in humans.

czechlist
Reply to  Patrick MJD
May 21, 2021 4:25 pm

It is called an ESG Score and it will eventually be applied to all of us if someone doesn’t stop it.

ESG scores are designed to transparently and objectively measure a company’s relative ESG performance, commitment and effectiveness across 10 main themes (emissions, environmental product innovation, human rights, shareholders, etc.) based on publicly-reported data
Be a good citizen and you might get a loan

ozspeaksup
Reply to  Patrick MJD
May 22, 2021 3:54 am

because the very loud and annoying very few have been running email harrassment campaigns nonstop for the last few yrs
getup environment victoria and greenpeas are the ones whos mails i see
and theyre prolific in their false claims scare hysterics and utter lies

Reply to  Patrick MJD
May 22, 2021 5:31 am

What are those bubbles I can see in my VB beer?

Klem
May 21, 2021 12:41 am

This week the company I work for had each department list all of the risks we can think of, in my deparment someone mentioned weather risk but no one mentioned climate change risk. It didn’t even cross anyone’s mind.

We also have an environmental department, I’ll bet climate change risk was at the top of their list.

HAS
May 21, 2021 12:51 am

I’ve been thinking recently that the time has come to take a long position against the excesses of climate fever. It’s easy to find candidates, the problem is the regulatory risk that can survive well after rational people have moved on from worrying about the excesses.

Lewis Buckingham
May 21, 2021 2:37 am

Australian banks just lend on home mortgage and throw a bit to small business.
They may join a consortium but usually want to take low risk deals.
Mining and gas in Australia is incredibly profitable and can self finance.
https://www.crikey.com.au/2020/08/26/how-much-is-twiggy-forrest-worth/
The Bloomberg Billionaires List says Andrew “Twiggy” Forrest is worth US$15.6 billion, making him the 103rd richest person on this earth. 
The Bloomberg list actually understates Forrest’s wealth — it doesn’t include the A$1.1 billion in final dividends announced on Monday when Fortescue Metals, the country’s third iron ore miner, revealed record revenue and profits.
OPEC is happy tp help
https://www.opecbanks.com/mining_exploration_finan.html

Rio only had a revenue of US$44 Billion last year and is crying poor.

.https://www.macrotrends.net/stocks/charts/RIO/rio-tinto/revenue
The Aussie banks just wait for the Reserve Bank support and keep the Mums and Dads happy.
After the Royal Commission they are getting out of financial advice and superannuation.
Their income stream is bolstered by credit cards up to 20% interest when they borrow at .88%.
‘Nice work if you can get it, you can get it if you try”
https://genius.com/Frank-sinatra-nice-work-if-you-can-get-it-lyrics

Joseph Zorzin
May 21, 2021 4:48 am

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

China?

Sara
May 21, 2021 5:07 am

Okay, okay, okay – you want NET ZERO, do you, Bankerguys? Then dump computers and use mechanical pencils, pens and inks.
I guarantee that this method will produce ZERO emissions, unless you’ve got something better (which I doubt). And while I’m at it, go back to using typewriters and mimeograph machines. No more photocopies of anything, period.
(If I have to post the “sarc” tag….)

TonyG
Reply to  Sara
May 21, 2021 11:11 am

Nope, can’t use pencils. CARBON neutral, remember? 🙂

Oh, and no CARBON paper, either.

Joe
Reply to  Sara
May 21, 2021 6:54 pm

You could change the one word in the Australian federal law that would make nuclear power generation legal in Australia. I’d love to be a ground-floor investor in that!
We certainly have our own uranium resources here, and one could ask;
“If selling our uranium to countries elsewhere is ethical, why isn’t generating (green-ish, more of a blue) power with it here ethical?”

Bruce Cobb
May 21, 2021 7:26 am

“Crikey, throw another bank on the barbie!”

CD in Wisconsin
May 21, 2021 7:34 am

“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.”

*************

I’ve mentioned this a number of times before, and I’ll do it again. Do the brilliant Einsteins at these banks realize that coking coal is needed for the manufacture of solar panels and the steel for wind turbines?

Does anyone think that the activists are going to stop at coal financing when it comes to pressuring banks? Take away the financing for all fossil fuels, and what are you left with? Nuclear. Oh, but the many in the environmental movement are anti-nuclear as well. Scratch nuclear, and what are you left with?

We live in a world which is increasing devoid of any rational thought….at least in the wealthy developed nations. “Those who the Gods would destroy, they first make mad.”

Pat from Kerbob
May 21, 2021 7:48 am

This drive to choke off new fossil fuel development when there is no current viable alternative is going to hit a wall eventually. There is no possibility to create enough renewables and EV’s and all the massive increase in mining and processing that goes with it before the existing developed fossil fuel reserves are drawn down to the point where the cost skyrockets.
Then what?
Economic and human catastrophe.

It is not possible to create all the renewables and EVs even if we maintain fossil fuel production in the meantime.

czechlist
Reply to  Pat from Kerbob
May 21, 2021 4:35 pm

The politicians believe governments can will something into existence if they spend enough money. I hear them efer to the Manhattan Project but they won’t understand it was based on actual science and not hopes and wishes.

Olen
May 21, 2021 8:52 am

Where is the virtue in banks not doing business with enterprises that are profitable, reliable and necessary for people to progress in their lives. Following the advice of international regulatory bodies is a weasel excuse for supporting a fraud.

The attempt to destroy entire industries using banks is a way for liberal politicians to get an agenda through that they could never achieve with a law.

ferdberple
May 21, 2021 9:31 am

Why would any sane person think it will stop with fossil fuels? Take away the fossil fuels and the environment industry will be complaining about the windmills killing birds and causing noise pollution and shrinking the size of rat penises. And take away the windmills, the complaints will start against solar panels and …

ozspeaksup
Reply to  ferdberple
May 22, 2021 3:57 am

take away the windmills, the complaints will start against solar panels and …
we can but hope
i HAVE heard a greenie mention birdkills on air so its a start

Alec Rawls
May 21, 2021 9:36 am

“Climate risk” is not a financial risk and these banks are violating their fiduciary duties by pretending it is.

Even if the climate theories behind this pressure were not a fraud and CO2 would cause financial harm a hundred years from now that harm would still not attach in particular to the activities that produce it.

A coal plant would not suffer more climate injury than a farm say. Oh wait, farms will greatly benefit from more CO2 so that is a bad example but you get the idea.

They are not analyzing financial risks to the bank of the loan, only some extraneous risk to society which (besides being utterly fraudulent) is not properly something for a bank to account. If society decides to get really stupid and impose carbon taxes THAT would be a cost that the loan recipient would bear, creating a financial risk for the bank.

Putting other miscellaneous social concerns above the actual financial interests of the stockholders means the bank managers are effectively stealing money from stockholders to donate to their own favorite charities. This violates the political rights of individuals to choose what causes they want to support or not and in many countries is illegal. It should be illegal everywhere.

Chris Nisbet
May 21, 2021 9:45 am

Hmm, identify and disclose ‘climate risk’.
So something like…
– Risk of increasing global temperature: ~0.
– Risk of increasing rate of sea level rise: ~0.
– Risk of increasing number and strength of storms: ~0.
On the other side of the balance sheet.
Benefit to humanity: Massive.

Job done?

Gary Pearse
May 21, 2021 1:59 pm

“are requirements driven by international governance setting bodies, of which Australian regulators and Australian companies are members”.

Ozzie banks, start getting a backbone like Philippines, Indonesia, Japan. Pakistan, Bangladesh. Start an independent body and be a member of that! Don’t be a ‘regular guy’ with these evil command economy barbarians. I might buy some bank shares and sue your asses off for avoiding profiting from what has become the best investment sector ever. Risk couldn’t be lower! Think how you want to be remembered when this whole meme is dead: go along ‘regular guy’s or shrewd launcher of the most profitable banks in the world.

LdB
Reply to  Gary Pearse
May 21, 2021 3:46 pm

Well the Australian banks have a PR problem as they been breaking money lending laws, charging dead peoples estates for services, charging for non existent services as laid out in the Banking royal commission. So they need the PR kick of being good people rather than ripoff scum they are and the left will help them if they just ban coal financing.

You know the saying you dance with the devil at your own peril.

markl
May 21, 2021 8:26 pm

They’re eating their own and don’t realize it.

goracle
May 22, 2021 1:48 am

ESG scores… it will infect most every aspect of your life very soon if sanity does not prevail.

John Kelly
May 22, 2021 9:21 am

The big problem that I see on this issue is not the funding because as Eric says the stock exchange can supply that. But it’s the lack of insurance. Having been a mining company director for years I know the petty minds of auditors, lawyers and most of all mining bureaucrats. No insurance will mean no project because company directors will have the frighteners put on them, especially by anti-coal groups saying “What if this happens and you have no insurance?” And this will extend so coking coal projects won’t be on their own. We know how the left hates mining. And who’s fault is this? The bloody Coalition government, sadly including the Nats, who for years have pandered to the radical green movement to keep urban seats and power. I could go on and on, but suffice to say I won’t be voting LNP at the next Federal election, even though my local LNP member is a good friend. One Nation here I come.

BSC
May 24, 2021 1:23 am

Fear of climate activists is driving all of this

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