New Zealand political party suggests imposing a $500,000 penalty on banks for discontinuing services due to ESG goals
One of the three parties in NZ’s coalition government is proposing fines for banks that refuse to provide services to businesses for social or environmental reasons.
Banks that decline services to customers based on environmental or social concerns could face fines of up to $500,000 (US$282,000) under a proposal from one of the three parties in New Zealand’s coalition government, NZ First.
The resources minister incorrectly argued that banks had no right to refuse services to customers engaged in legal activities.
Now, another NZ First MP, Andy Foster, plans to introduce a private member’s bill that would prevent banks from withdrawing services for reasons such as reducing exposure to polluting industries and impose fines if they do so.
Banks would no longer be allowed to deny services based on Environmental, Social, and Governance (ESG) frameworks but would need to make decisions purely on commercial grounds.
The selection of member’s bills is random, drawn from a tin in the office of the Clerk of the House, with those chosen debatd on alternate sitting Wednesdays.
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While MPs can introduce bills on any subject, they typically seek approval from their party’s caucus.
New Zealand First leader Winston Peters (R) in the crowd at Ellerslie Racecourse in Auckland, New Zealand, on Oct. 1, 2023. Fiona Goodall/Getty Images
The bill has support from NZ First leader and Deputy Prime Minister Winston Peters, who believes it ensures fairness and prevents ESG standards from being influenced by unaccountable climate activists.
However, the New Zealand Banking Association defends the practices of its members, stating that banks must comply with regulatory obligations, and decisions are based on credit risk policies.
Global Fossil Fuel Loans
According to bankingonclimatechaos.org, the world’s top 60 banks loaned fossil fuel companies $705.8 billion in 2023.
From 2016 to 2023, Westpac loaned over $10.7 billion, National Australia Bank lent $16.74 billion (including BNZ), Commonwealth Bank loaned $17.5 billion (ASB Bank in NZ), and ANZ Bank provided $25.28 billion.
Foreign-owned banks licensed in New Zealand, like HSBC and Bank of China, also loaned significant amounts over the same period.
350 New Zealand reports that the emissions caused by the companies supported by the country’s major banks amount to billions of tonnes of CO2.
While National and the ACT Party, NZ First’s coalition partners, have yet to declare support for the bill, the government is interested in the growth of mining, oil, and gas industries for the country’s future prosperity.
Sheep graze in a field outside the now-closed Pike River coal mine in Greymouth on November 26, 2010. Marty Melville/AFP via Getty Images
Will the Proposal Work?
Foster’s proposal raises questions about its practicality. Banks could justify refusing service to businesses in climate-exposed industries based on commercial assessments related to financial risks, following commitments to Net Zero.
However, such reasoning may not justify account closures, as seen in the BNZ case that sparked controversy.
Banking litigation expert Ben Upton from Simpson Grierson in NZ suggests banks are facing a dilemma of conflicting pressures from regulators, shareholders, and the public.
Recently, several major U.S. and Canadian banks exited the Net-Zero Banking Alliance, while Australian and NZ banks have maintained climate targets despite political challenges.
