The Chief executive of the National Australia Bank – NAB – has said that investments in coal are too risky, with the bank opting instead for investments in renewable energy for its long-term portfolio.
The statement comes after a parliamentary hearing where Federal MP Craig Kelly had the opportunity to ask Ross McEwan, NAB’s CEO why his bank was hesitant to issue more loans to coal mines.
Mr McEwan’s response was extremely significant, given that the NAB is changing its position on coal mines as they’re believed to be a long-term risk for the bank.
“We think about the long term, where we think the future value will be, and it will be towards renewable energy,” – National Australia Bank CEO, Ross McEwan
He said that the NAB was yet to make a definitive decision as to the profitability of the coal industry, however, it is acting in the “best interests” of the $57 billion company, which doubts the long-term viability of thermal coal.
McEwan said that “from a risk perspective, this bank, quite rightly I believe, has tilted itself much, much toward renewables because it’s where we see the future for this bank and how we fund.”
The NAB chief continued to explain that “we’ve made a strategic decision from a banking perspective to tilt our business toward renewables. Just as in our financing of aircraft, we have tilted towards lower emission aircraft which are much more efficient.”
“Just as we are working with the agricultural sector to get much, much more efficient and carbon neutral in the production of meat, so it’s just not one industry,” he said.
As it stands, the NAB has $700 million of coal assets on its books – 0.07% of its total issued loans – with plans to half this figure by 2028 to $350 million, and eventually to zero by 2035.
Minister Kelly said in response that “to be fair, whether or not a particular coal mine will be profitable in 2035 takes a pretty good crystal ball to see what the future is going to be… and you’re taking a policy step now that specifically rules out loaning for a particular business that may very well be successful and profitable for many years to come, and in the national interest, and you’re ruling it out.”
McEwan responded to Kelly’s comments by stating that “we’re working across the industries to get a better result for, coming back to your point, for Australia.”
“It’s why we’re moving ourselves as a bank to be carbon neutral over a number of years, because we think these things will make a lot of sense financially for us and for our customers over time.”
“We think about the long term, where we think the future value will be, and it will be towards renewable energy,” McEwan added.
One of Australia’s largest mining companies, Rio Tinto made an exit from thermal coal in 2018 when it sold its last thermal coal mine, with BHP Billiton last month announcing plans to exit the thermal coal industry.
BHP said the company was aiming to increase its “future facing” commodities, which take advantage of “mega-trends of decarbonisation, electrification, diet, land use and population.”
Last week, BHP’s CEO Mike Henry released an internal report stating that risk management of its portfolio is a major driver for its diversification from coal and into renewables. Mr Henry said at the time of its release that climate change represented “an urgent global challenge and BHP has a role to play in overcoming it.”
He added that “we will continue to manage our portfolio for value and risk, taking into account the latest science and our scenario analysis.”
BHP’s report stated that “the complex and pervasive nature of climate change means that it can act as an amplifier of other risks across BHP’s risk profile,” the report reads, also stating that “climate-related risks can be grouped in two categories: transition risk and physical risk.”
“In assessing physical risks, we include consideration of the potential vulnerabilities of our operated assets, investments, portfolio, communities, ecosystems and our suppliers and customers across the value chain,” the report continued to explain.