SYDNEY, Feb 9: Australia’s largest retail bank, the Commonwealth Bank of Australia (CBA), announced on Wednesday that it would be signing onto the global Net-Zero Banking Alliance, which pledges a commitment to aiding the transition to zero emissions.
The commitment means the bank would publish interim targets for power generation, thermal coal and upstream oil and upstream gas, and provide transparency on their transition to net-zero emissions by 2050.
“Successfully transitioning to net-zero emissions will require a transformation of the global economy. It requires coordinated effort across sectors; and is contingent on policy, regulation, and technological developments,” said CBA Chief Executive Officer Matt Comyn.
It would also entail a realignment of the banks’ balance sheets as they move away from lending to fossil fuel enterprises and towards green energy solutions.
Dr. John-Paul Monck, CEO of SME Bank and adjunct professor at the University of New South Wales Business school, told Xinhua this move by CBA, which makes up such a large part of Australia’s banking industry, would in and of itself begin to reshape the entire sector.
“There are certain pockets of industries that banks just won’t touch now, because they don’t want to be associated with that.”
He said that for larger banks with trillions of dollars on their balance sheets, this would likely be a gradual process of decoupling.
“If the banking sector completely walked away from say, coal or whatever industry … their rates (from non-bank lenders) they would pay could be double, triple,” he said, indicating that banks will play a significant role in disincentivising high-emission industries.
However, climate change solutions rooted in technological development and growth have drawn widespread criticism in the climate change advocacy world.
Monck said while the transition to sustainable industries could constrain business, ultimately long-term growth will be made possible through sustainable businesses.
“There’s always this tug of war between safety and profitability and therefore growth.”
“And if we’re talking about 2050, we’ve got less than 28 years to run. What are we doing right now, the most effective time to start is today, because of the compounding effect of what you do.”