NAB Warns Australian Businesses of Higher Interest Rates If Emissions Are Not Cut
One of Australia’s largest commercial banks has warned that lenders across the country will soon impose higher interest rates on businesses that do not have a plan to reduce their carbon emissions.
During a recent business event, Andrew Irvine, the group executive for business and private banking at the National Australia Bank (NAB), shared his view on the outlook of the Australian lending market and what banks would expect of business customers.
The executive said business owners needed to start keeping tabs on their carbon emissions and come up with a plan to reduce them if they wanted to get more favorable interest rates.
“If your abatement is less than average, your interest rate will be higher than if your abatement is higher than average.
“Our risk as a bank will be impacted by how green your business is. It’s not to say we won’t bank you, but the cost of borrowing will be affected.”
Mr. Irvine’s statement comes as NAB steps up its net zero transition while providing significant support to businesses decarbonizing.
Around 73 percent of NAB’s lending to energy generation is to renewable energy.
Between 2015 and 2022, the bank provided $70.8 billion in financing activities to assist businesses dealing with climate change and supporting Australia’s transition to a low-carbon economy.
In November, the NAB reported an 8.8 percent increase in cash earnings to $7.731 billion for the 2022-2023 financial year.
Commonwealth Bank Stops Funding New Oil and Gas Projects
While the NAB is forging ahead with its climate action plan, other banks are not slow on the uptake.
Specifically, the bank would not finance new or expanded oil and gas extraction projects, as well as storage infrastructure or transmission pipelines linked to those projects.
At the same time, the CBA refused to fund new or expanded thermal coal mines and new coal-fired power plants.
The bank will also force its fossil fuel clients to go through an assessment of their environmental, social, and economic impact, while requiring them to publish independently verified plans to cut emissions by 2025.
The announcement will likely place further pressure on the oil and gas industry, which has faced difficulties securing finance for their projects in recent years due to growing public concern about climate change.
Both CBA and NAB are signatories to the United Nations-convened Net Zero Banking Alliance, a group of global banks working to help reach net zero by 2050.
Monica O’Shea contributed to this article.
