New research has taken aim at the big four over their apparent tardiness regarding Scope 3 or indirect greenhouse gas emissions.
Local carbon fintech, Emmi, revealed “patchy” and inconsistent Scope 3 reporting from the banks across their lending and investment portfolios, which, it said, exposed them to greater carbon risk.
Emmi applauded Commonwealth Bank (CBA) for recently disclosing its Scope 3 emissions which the fintech estimated at 2,300 times higher than the bank's direct emissions in Scope 1. This, it explained, translated to more than $6 billion in costs by the end of the decade as carbon pricing is allocated to lenders.
According to Emmi's first data-backed estimate, the Scope 3 emissions of the remaining banks — ANZ, NAB and Westpac — stand at between 18 to 24 million tonnes.
The fintech evaluated that when the magnitude of indirect emissions is factored into the banks' overall footprint, each of the big four moves into the top 15 heaviest emitters on the ASX.
Commenting on the research, Ben McNeil, co-founder and chief information officer of Emmi, warned that although local regulators do not require companies to report on Scope 3 emissions, banks and their investors lack visibility of their financial exposure to the carbon transition due to “significant gaps” in data quantifying.
“Better modelling that includes Scope 3 emissions will help the banks understand the true risk position on carbon across their diversified lending and investment portfolios, uncovering previously hidden financial risk,” Mr McNeil said.
“Best practice measurement leads to best practice management.”
Mr McNeil also cautioned local companies operating globally that they will need to meet expanding reporting requirements in the US, Europe, UK and New Zealand.
“Financial institutions need to ready themselves to better quantify their Scope 3 financed emissions footprint and carbon risk exposures associated with those. This knowledge provides an important baseline for measuring and managing potential risks in the transition to low carbon economies,” added Mr McNeil.
ANZ confident in its net zero journey
In an ESG investor briefing on Monday, ANZ revealed that 100 of its largest emitting business customers produced over 150 million tonnes of direct CO2 emissions during 2019–20, accounting for some 30 per cent of the national total.
The big four banks said it is engaging with these customers and supporting them to “establish or strengthen” transition plans.
ANZ also confirmed that it is on track to set 2030 targets for nine priority sectors by 2024, having commenced this work last year by setting emissions intensity targets for power generation and large-scale commercial real estate.
In a note outlining the bank's ESG-related plans, chief executive officer, Shayne Elliott, said ANZ's aim is “to improve the financial wellbeing and sustainability of our customers”.
“Our three key priorities are: helping people save for, buy and own a sustainable, liveable and affordable home; helping people to start or buy and sustainably grow their business; and helping companies move goods and capital around the region,” Mr Elliott continued.
He revealed that ANZ will be announcing targets for oil and gas, and building products later this year.
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
