Note: We invested in Westpac at the date of publication of this article, but our investments can change for both ethical and financial reasons.
If Westpac decided to lend to the Adani Carmichael mine, we would have to divest.
At Australian Ethical, we apply a rigorous ethical screening process to all our investments. We only seek out companies that positively impact society and the environment. In addition, we avoid investments that cause unnecessary harm to people, animals, society and the environment.
In the finance sector, we believe the big banks and super funds can be key change-makers for the drastic action needed to respond to climate change. However, they provide financial services to companies that have high-emissions in the fossil fuel sector, which we are strongly opposed to.
One of the challenges we face in being an ethical investor is determining where to draw the line. Our members and the general public have expressed interest in understanding why we invest in Westpac, but not the rest of the “big 4” banks. Our strict criteria for selecting which banks to invest in incorporate a number of factors. Here are three main ones:
- The proportion of their business devoted to positive activities such as residential lending (we consider this a positive as it helps people purchase homes);
- Our assessment of the ethical merits of the business sectors they lend to;
- Their commitment at a corporate level to sustainability and responsible lending.
As a result, most of the smaller banks in Australia pass our screening process, and as such we have invested in the Credit Union of Australia, the People’s Choice Credit Union, Beyond Bank, Heritage Bank, Bendigo and Adelaide Bank, and bankMECU. A full list of who we’ve invested in can be found on our website at Who we invest in.
We invest in Westpac mainly because of their residential lending activity, but also because we consider them to be a sustainability leader amongst the major banks. Some recent reported progress includes:
- In 2013, Westpac committed to make available up to $6 billion for lending and investment in the CleanTech and environmental services sector by 2017. In 2014 they reported they had already exceeded this target, reaching $8 billion.
- Over the last two years, Westpac has increased lending and investment in both the CleanTech and environmental services sector by 2.5 times.
- They’ve reduced brown coal mining lending to 1/3 of their 2010 level, down to about 0.1% of their total lending (for their Australian and New Zealand operations as at 31 August 2014).
- The emissions intensity of their infrastructure and utilities lending is less than half of the benchmark intensity of the National Energy Market.
All of the big banks are making progress with disclosure but we assess Westpac to be a leader. Positively, Westpac was the only one of the big four banks not to receive a 2014 shareholder resolution regarding disclosure of the extent of its lending to fossil fuel projects. At the end of 2014, Westpac went well beyond their regulatory reporting requirements, publicly providing additional detail about its lending activities. This release included a clear breakdown of its remaining connections to the mining sector, its CleanTech and environmental services lending, and the emissions intensity of their Infrastructure and Utilities portfolio.
In 2014, Westpac ranked number one globally on the Dow Jones Sustainability Indices, were placed first in the Global 100 Most Sustainable companies in the world, and were the recipient of the Money magazine award for Socially Responsible Bank of the Year.
We know the big banks have a critical role to play in addressing climate change, and we believe that Westpac’s leadership in taking account of its social and environmental responsibilities has the capacity to catalyse change within other banks. Indeed, in 2015, some of the other “big 4” banks have been following Westpac’s lead and significantly reduced their lending to, or investments in, fossil fuel industries.
While we do not support Westpac’s lending to emissions intensive sectors, we are actively engaged with them on this issue, exercising our power as a shareholder to advocate positive change. On balance, we believe that at this time our investment in, and active engagement with, an imperfect Westpac advances our Ethical Charter. As with all our investments, we will continue to monitor this assessment. For more info, see our Ethical Charter.
Our investment in Westpac is current as of the publication date of this article. There is always the potential for our investments to change over time, but we are one of the few wealth management businesses to declare our investments, and this information is always freely available on our website or by contacting us.