Bank regulators face climate change grilling

Australian Financial Review
John Kehoe
15/12/2020

Financial regulators will join banks and insurers in being grilled by a parliamentary committee poised to investigate financial institutions for pulling back on lending and insurance to mining-related businesses because of climate change.

Government and Labor members of the Joint Standing Committee on Trade and Investment Growth on Monday fought over the need for the inquiry that will be led by climate change sceptic, Queensland Liberal National MP George Christensen.

The committee is due to vote on Wednesday on setting up the inquiry and negotiate the potential terms of reference, after a request from the federal Minister for Resources, Water and Northern Australia, Keith Pitt.

He has asked the committee to investigate lending to and insurance of mining projects, after financial institutions tightened up their climate and fossil fuel policies, particularly for coal.

Sources said the Australian Prudential Regulation Authority and Australian Securities and Investments Commission would also be hauled before the inquiry, after they directed financial institutions to better consider the financial risks of climate change and international shifts away from fossil fuels.

Labor Senator Tim Ayres said: "Keith Pitt and George Christensen live in an alternative universe where they think the Bureau of Meteorology and the big banks are conspiring to invent this thing called climate change.

"I'm not in the Parliament to be a defender of the banks, but shooting the messenger is pretty whacky.

"It is absolutely clear that [for] some areas affected by flood and fire that insurers are making a set of economically rational decisions to put premiums up.

"That's not an ideological decision, that's a market approach to where the risks are higher."

ANZ boss Shayne Elliott has asked its 100 biggest-emitting business customers, in sectors such as mining, energy, transport, construction and agriculture, to provide a low-carbon transition plan by 2021.

ANZ will no longer finance new coal mines or coal-fired power stations and by 2030 will phase out lending to thermal coal customers.

Other big banks have similar policies.

Liberal senator for Victoria, David Van, said Mr Pitt was "not alone" in hearing from mining-related businesses about problems attaining bank loans or insurance.

If you're heavy industry needing reliable energy 24 hours a day, renewable energy is more of a risk to your solvency than the weather.

— Queensland Liberal National senator Gerard Rennick,

"The second some businesses say they are in mining, banks and insurers often run away, which is just killing projects.

"They are clearly being pressured by pressure groups or activist investors.

"It deserves to be looked at by a committee to see what evidence is presented and, if needed, to shape policy."

'Shooting ourselves in the foot'

A financial industry source said institutions were adjusting their policies "not because we're leftist greenies but because of the associated risks of these assets".

Queensland Liberal National senator Gerard Rennick, who has spoken to ANZ's Mr Elliott about the bank's climate policy, said Australia was "shooting ourselves in the foot" on climate action.

"It's a question of whether it's a genuine risk or virtue signalling," Senator Rennick said.

"We are deindustrialising our own country and shipping the emissions offshore to countries that aren't signed up to Paris or doing anything about carbon emissions until 2030.

"I would have thought if you're heavy industry needing reliable energy 24 hours a day, then renewable energy is more of a risk to your solvency than the weather."

Senator Rennick said he would support an inquiry, but would prefer the matter being directly elevated to Treasurer Josh Frydenberg and cabinet to consider taking action on.

Mr Pitt told ABC radio on Monday that mining services businesses, engineers, ports and small firms connected to coal mining were "having trouble firstly getting insurance if they work in the resources sector and secondly, finance".

"Now I don't think that should continue," Mr Pitt said.

He said insurance for professional indemnity and public liability had become challenging to attain.

An Insurance Council of Australia spokeswoman said it "will work its members to understand the current and potential future implications arising from changes in investment and business practices to determine the consequences for both the customer and the industry".