In a bold move towards environmental responsibility, Commonwealth Bank (CBA), Australia’s largest lender, has announced it will cease financing fossil fuel companies that fail to comply with the climate goals outlined in the Paris Agreement by the end of 2024. This decision sets CBA apart from its rivals, who have yet to fully disengage from supporting coal, oil, and gas businesses.
CBA’s commitment to a sustainable future is evident in its new report, which clarifies that clients who do not align their emissions with the Paris Agreement’s goal of keeping global temperature increases well below 2°C will be denied new corporate or trade finance, as well as bond facilitation beyond 2024. To further solidify its stance, CBA has established ‘core criteria’ for its clients, requiring a medium-term emissions reduction plan for 2035 and a net-zero ambition covering at least 95% of their carbon pollution.
This decisive action by CBA has garnered praise from climate lobby group Market Forces, which previously labelled the bank as the ‘worst offender on climate and lending to fossil fuel companies.’ Market Forces now recognizes CBA as the first major Australian bank to break ties with climate-damaging clients.
While CBA’s commitment is welcomed, the bank’s rivals are facing criticism for their continued financial support of fossil fuel industries. Market Forces has condemned ANZ, NAB, and Westpac for their recent loans totaling €450 million to aid a fossil fuel company’s expansion plans, a move seen as directly contradicting their climate commitments.
Despite the pressure from activists, some banks are taking steps to reduce their exposure to the fossil fuel industry. ANZ has reported a significant reduction in its financing of the power sector, oil and gas, and thermal coal between 2020 and 2023. Similarly, NAB announced its decision to halt financing for new thermal coal mining customers and projects in September 2023.
Beyond its commitment to climate action, CBA also acknowledges the emerging financial risks posed by climate change. The report highlights a growing concern about the frequency and impact of extreme weather events, which are affecting property values and the insurability of homes. CBA cites rising insurance premiums and growing affordability stress among households as evidence of this risk.
The bank has estimated that its exposure to home loans in areas at high physical risk from climate change amounts to billions of Australian dollars. While CBA acknowledges the financial implications, it emphasizes its commitment to transparency and proactive risk management in an increasingly volatile climate.
