Sustainability has become a lucrative business opportunity, with shifting customer preferences pushing up trends such as the divestment movement leading to an increase in enquiries from potential customers, Bank Australia says.
The customer-owned bank, formerly known as bank mecu, is fielding calls from people looking for a financial institution with a low carbon strategy.
Spokeswoman Nikki Jordan said the bank always asks why customers want to switch. “It’s largely due to our responsible approach to banking, and [our] interest rates,” she said.
Bank Australia late last year signed the Paris Pledge, and also committed to the seven principles of the We Mean Business Coalition. These include supporting the adoption of science-based carbon emission reduction targets; backing a carbon price; procuring 100 per cent of electricity from renewable sources; reporting climate change information in mainstream reports; responsibly engaging in climate policy; removing commodity-driven deforestation from supply chains by 2020; and reducing short-lived climate pollutants.
Australia’s big four banks – Westpac, Commonwealth, ANZ and National Australia Bank are also signatories to We Mean Business, as is Teachers Mutual Bank. According to Market Forces, of these five banks, only Teachers Mutual has no investments in fossil fuels.
This trend towards more sustainable investment practices was captured as part of a report released at the end of last month by WMB that showed the global market for more sustainable investments in general was on the rise.
The clean technology industry, for instance, was growing faster than the global economy as a whole. The report showed there was a US $13.5 trillion market for the energy sector in energy efficiency and low carbon technologies due to pledges made in national climate plans under the Paris Agreement.
Companies with robust climate commitments were best placed to access these new opportunities, including expanded markets in building energy efficiency and demand-side energy management, low carbon and electric vehicles, renewable energy, water and waste management.
According to Ms Jordan, Bank Australia was well placed to capture the benefits of that trend, and this was bolstered with the bank’s Paris Pledge and We Mean Business commitments.
The background includes sustainability reporting since 2005, the same year the bank signed a sustainability covenant with the Victorian Environmental Protection Agency. This led to a carbon management plan that led to it becoming carbon neutral from 1 July 2010.
Ms Jordan said the motivation behind the moves was a recognition that the planet has finite resources, and that as a business, the bank has a role to play in being “part of the solution”.
The bank exceeded the emission reduction target set in 2010, and achieved a drop of 18 per cent in carbon emissions between 2010 and 2015. Ms Jordan said these gains have been made particularly through improving the efficiency of information technology equipment and other energy efficiency measures.
The sustainability strategy also included setting targets around reducing emissions from waste to landfill, gas and transport use.
Sustainability reports are now included in annual reporting, and a high level assurance is carried out by EY of Scope 1, Scope 2 and some Scope 3 emissions.
As the bank is committed to being carbon neutral, these emissions are offset through the purchase of carbon credits from two Australian offset programs – Tasmanian forestry protection certified under the Verified Carbon Standard and Savannah burning in the Northern Territory.
Other initiatives include the installation of solar panels on the head office rooftop and a number of branches, and intentions to further expand the use of solar and renewable electricity supply from the grid, Ms Jordan said. The target is 100 per cent renewable electricity.
Beyond offsetting its own emissions, the bank has also taken action to offset the actions of customers that take out loans for cars or new homes. It has created a conservation reserve in Victoria’s western Wimmera district comprising 1000 hectares of unproductive farmland with high quality remnant vegetation. Revegetation of the land is designed to offset emissions from cars customers purchase, and increasing habitat quality and enhancing biodiversity aims to offset any loss of biodiversity created by new home construction, Ms Jordan said. The bank’s staff are continually being trained to communicate about the project as part of the engagement process with customers.
Ms Jordan said the bank did not provide loans to fossil fuel projects. The bulk of its financial flows come from customer’s savings and loans, and investments in the money market required by the Australian Prudential Regulation Authority.
The APRA rules mean the bank must manage a diversified investment portfolio across a number of authorised deposit-taking institutions, including the four major banks and regional banks. However, this means the bank is not able to determine the exact use of every dollar invested in this way, and that there is some uncertainty about whether the use of all of its investments by the ADIs matches its own responsible investment and lending policy.
The feedback from customers around the bank’s initiatives has been positive, Ms Jordan said.
“We regularly engage with our customers to understand what is important to them, and renewable energy and climate change have emerged consistently over time,” Ms Jordan said.
The bottom line is, the bank’s financial position has been growing quite strongly in terms of savings and loans. The balance sheet performed strongly with net assets growing by 10.8 per cent in the 2014/15 financial year, which Ms Jordan said was above system growth for the Australian banking sector.