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‘Unintended consequences’: Banks warn of rising costs if forced to fund coal

NAB group executive for institutional banking David Gall said the ability of Australian banks to access global capital markets is crucial to keeping funding costs low which, “will translate to benefits for Australian businesses, to Australians full stop in terms of the cost of borrowing”.

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“I just think in running through that scenario, there are a lot of consequences, maybe some intended, but potentially some unintended, that should be carefully thought through.”

Meanwhile, Westpac’s chief financial officer Michael Rowland said US finds titan Blackrock had made clear it would “reconsider how it allocates capital” if Australian banks do not have clear plans for mitigating climate risk.

“From a Westpac point of view, Blackrock is a major shareholder,” Mr Rowland said. “Australian banks are reliant on overseas capital markets and our institutional investors. They are an important source of funding. Without equity and debt, it’s more difficult for us to lend to Australians.”

CBA’s institutional bank boss Andrew Hinchliff also rejected the allegation the banks had succumbed to investor pressure, rather saying its decision to exit thermal coal was informed by price volatility and financial risks that increase as the world mobilises to address climate change.

“Climate change is certainly a hot topic at the moment for all the right reasons,” Mr Hinchliff said. “There is increasing amounts of science, data and information that’s becoming available to us around this particular topic. It lays out the problem as it relates to climate change relatively starkly. That’s the problem that we all collectively face.”

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ANZ’s institutional bank boss Mark Whelan said there were a range of approaches from global and local investors who want greater action on climate change, but agreed it was “certainly going in one direction”.

“Which is they’re seeking to understand what we’re doing and they’re likely to make decisions around that based on their own particular position,” he said. “The questioning is becoming more intensive and more specific. It would lean more to the prescriptive side.”

Mr Whelan added ANZ’s decision to exit thermal coal was driven by technological advancements in renewable energy and geopolitical developments. “We’re seeing companies, governments, regulators, all around the world setting targets… to reduce the use of thermal coal in their power generation.”

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