ESG Round-up: NatWest to slash fossil fuel exposure

NatWest is set to ditch two thirds of its exposure to fossil fuel companies that have not set out Paris-aligned transition plans, having reduced its exposure to oil and gas by £878m over the course of 2021, according to its annual report. The bank said that it would stop providing lending and underwriting services to coal, and oil and gas companies which do not have a climate transition plan aligned to the Paris Agreement from the end of December 2021, and will fully exit the £437m exposure to coal companies and £530m exposure to oil and gas companies in this category “as soon as is practicable”. Fossil firms making up £461m of exposure will be retained as customers provided they comply with NatWest’s environmental, social and ethical policies.

The Australasian Centre for Corporate Responsibility (ACCR) has called Australian utility AGL’s rejection of Brookfield’s shock takeover bid as “foolish”. AGL, the largest power producer in Australia, today dismissed a $3.5bn takeover proposal from Canada’s Brookfield and local billionaire Mike Cannon-Brookes in a deal which the bidders said would accelerate AGL’s exit from coal and achieve Net Zero emissions by 2035 – five years earlier than planned. AGL shareholders are due to vote on a plan to split AGL’s coal and retail business later this year, which will be shelved if this or another takeover bid succeeds. “For years, AGL has refused to invest in the transition, with growth and transformation capital expenditure as low as it’s been for a decade,” said ACCR climate director Dan Gocher. “While plenty of rumoured bidders have been mentioned in the media, none other than the Brookfield consortium have surfaced. The board would be foolish to dismiss them outright.”

Climate and environmental considerations may be factored into the minimal capital requirements that EU banks need to put aside as a buffer for future losses, according to a speech by ECB supervisory head Frank Elderson on Friday. Elderson said that regulated banks will this year receive “comprehensive feedback” on shortcomings with regards to climate and environmental risk management, combined with the observations from the ECB’s 2022 climate stress test. “This will ultimately influence banks’ minimum capital requirements,” he added.

Chinese banks are at risk of defaults from carbon-intensive local sectors including thermal power, steel and cement, according to Chinese central bank Vice Governor Liu Guiping, due to higher climate-related costs and green government policy. According to comments reported by Reuters, Guiping said that recent climate stress tests conducted by the supervisor revealed that the “repayment capability” of the three sectors would continue to decline if they failed to carry out low-carbon transformation plans.