The missing piece of the net zero banking puzzle

John Kavanagh

Australian banks have taken big steps in developing their emissions reduction targets over the past year but most of that work has been focused on the financed emissions of large corporate clients in high-emitting industries. But that is not going to get them to net zero, a new report argues.

Banking for Net Zero, a review of global developments by Accenture, says banks have not made much progress developing products and services for the bulk of their SME customers and their retail customers.

Nor have they made much progress embedding a climate-aware culture in areas other than their institutional divisions.

Accenture’s Australia and New Zealand banking sector lead, Alex Trott, said: “The big banks have set up specialist teams to work on bespoke, large-scale transactions. Change at the SME and household level can contribute to a lot to decarbonisation but we are not seeing the same level of activity there.”

Lots of Australian banks and non-bank financial institutions can point to a range of green products, including EV auto loans and personal loans for the purchase of household renewables. 

Earlier this month, NAB launched an equipment finance green loan program for business banking customers looking to buy more sustainable and efficient vehicles and equipment. NAB is working with Norwegian standards certification company DNV on the project.

Despite these developments, the Accenture study found that, like banks around the world, Australian banks are behind in targeting net zero in their SME and retail businesses.

“Yes, they have some products but they don’t offer any advisory services in that end of the market,” Trott said.

Accenture estimates that only 12 per cent of the world’s leading banks are on track to reach net zero for their scope 1 and 2 emissions (emissions produced in their own operations and from their energy consumption) by 2050 and fewer than 5 per cent are on track for net zero for their scope 3 financed emissions.

Scope 3 emissions are the important ones because they represent more than 95 per cent of banks’ overall emissions.

Trott said banks have an opportunity to be the stewards of customers’ net zero transitions across all their operations.

“The middle market segment in particular is struggling to identify the best starting point, or is discouraged by the scope and complexity of the undertaking,” he said.

The study found that management in most leading banks is eager to move to net zero and help customers make the transition but they are having trouble working through it.