Inside Westpac's decarbonisation challenge
Australia’s oldest bank progresses initiatives to cut greenhouse gas emissions on the way to net-zero.
From its commitment to the global Net-Zero Banking Alliance to the reality of tackling Scope 3 supply chain (upstream) emissions and more, here’s how Westpac is rising to the challenge of decarbonising its own operations.
Westpac’s climate journey stretches back to the 1990s when it became the first bank to join the Australian Greenhouse Challenge.
It was the first Australian bank to deliver a Climate Position Statement in 2008, and in 2018 it was the first bank in the world to launch a Green Tailored Deposit certified by the Climate Bonds Initiative (CBI).
Since then, Westpac has joined the Net-Zero Banking Alliance and delivered its fifth Climate Change Position Statement and Action Plan in 2022.
Ceri Binding, Westpac’s Head of Utilities and Direct Environment, and Tim Parker, Director of ESG, Westpac Institutional Bank, share the bank’s major operational decarbonisation achievements and challenges, and its increasing support of the net-zero transition through innovative sustainable finance deals.
How is the ESG momentum building within the bank, and do ‘firsts’ really matter?
Ceri Binding: What matters most is that we're supporting, facilitating and driving change in an impactful way, and that as we tackle climate change we also seek opportunities to deliver wider positive impact for people and nature.
From an operational perspective, our Australian operations have been certified under the Climate Active Carbon Neutral Standard for Organisations (as it’s now called) since 2012. While our early achievements were substantially driven by a small group of people within the bank, led by Westpac Group Sustainability, climate change is now one of our group-wide strategic priorities, with responsibilities for delivery embedded across the business, including specialist teams in both customer facing divisions and operations.
How are you seeking to decarbonise Westpac operations and what are the major achievements to date?
CB: The standout from an operational perspective is the commitment we made in 2019 to source the equivalent of one hundred per cent of our global electricity consumption from renewables by 2025. We entered into a virtual power purchase agreement that year with Bomen Solar Farm in Wagga Wagga, NSW, that delivered 45 per cent of that target for Westpac group in 2021. We’ve completed the second phase of our transition and now source the equivalent of 100 per cent of our national electricity consumption from renewables from a combination of facilities: the Bomen Solar Farm in NSW, the Berri Solar and Battery facility in South Australia, and the Ararat Wind Farm in Victoria. We’re currently working on closing the gap to reach the 100 percent target for our global operations.
We have a number of additional emissions reduction initiatives underway. For example, we’ve installed our first electric vehicle charging facilities for employees at our new Western Sydney headquarters as well as at our Barangaroo and Kent Street offices, and are in the process of enhancing our employee benefits program to support our employees with sourcing renewables for their homes. We’ve also commenced the transition of our fleet to electric vehicles.
Making climate commitments requires evaluating risks and opportunities for an uncertain future. What are the challenges in the bank’s push towards sourcing the equivalent of 100 per cent of its global electricity consumption from renewables?
CB: The challenges have evolved over time. When we first set the target, the complexity and potential cost of delivering were the biggest challenges. Unfortunately, the simpler approaches to securing a renewable electricity supply are generally more expensive than the more complex route of entering into virtual power purchase agreements (VPPAs).
We chose to enter into VPPAs due not only to the commercial value to Westpac, but also the opportunities it presented to support the construction of new renewables capacity in Australia, as well as to deliver other social and environmental benefits. Our contracts with both Bomen Solar Farm and the Berri Solar and Battery facility included establishing community funds that support a range of social and environmental initiatives in those local communities.
The challenges we face in our international operations are unique to those markets. The renewables markets in the countries we operate in are at various stages of maturity and will require a different approach from that taken for our Australian operations. We’ll share more as we finalise and execute those plans.
Westpac has been a significant source of funds to new greenfield renewable energy projects in Australia for many years and you have a target of AUD 15 billion of new lending to climate change solutions by 2030. How is sustainable finance evolving?
Tim Parker: The development of an Australian sustainable finance taxonomy is underway, and this will be the real gamechanger when it comes to directing capital into projects and investments that will accelerate Australia’s transition to net-zero. Ahead of the national taxonomy, we’ve recently released our own Sustainable Finance Framework setting out our criteria for sustainable finance.
We’re seeing more opportunity to support the clean energy transition by supporting utility-scale battery projects. One example is renewable energy developer ACEN Australia’s New England Solar project in New South Wales, which began operating in 2023 and is the biggest solar facility in the state. Westpac provided a $75 million loan to help progress ACEN’s roster of projects, which includes wind, solar, batteries and pumped hydro.
There’s also an emerging wave of sustainable finance deals that include biodiversity targets, which contribute to emissions reduction via nature-based solutions such as carbon sinks. Our partnership with North Queensland Airports where Westpac acted as joint sustainability coordinator for the transaction, is an example of this. That was one of the first sustainability linked loans in the Australian market to address biodiversity and natural capital. It includes key performance indicators that incentivise the airport operator to enhance the surrounding habitat and help save threatened wildlife, working in partnership with the local Yirrganydji people.
Another recent opportunity has emerged in our consumer business. For our customers who finance an eligible electric vehicle, we’re now offering free public charging over a period of up to 12 months at more than 1,500 Chargefox stations around the country.
Westpac has a target to reduce its Scope 1 and 2 operational emissions by 64 per cent by 2025 and 76 per cent by 2030, relative to a 2021 baseline. How are you dealing with the challenge of your Scope 3 operational emissions?
CB: We have a target to reduce our Scope 3 supply chain (non-financed) emissions by 50 per cent by 2030, relative to a 2021 baseline.
Scope 3 emissions are a challenge for most industries and we’re tackling them through detailed planning and supplier engagement. We’ve reviewed our upstream Scope 3 emission sources and identified opportunities to reduce them. Some of the reductions will be delivered through our renewables transition program. The program to reduce our Scope 2 emissions will also support us with our Scope 3 upstream target as we work with our suppliers and customers to support and encourage their transition to renewables.
Other programs of work that support our Scope 3 supply chain emissions reduction include investing in electric vehicle charging infrastructure for our corporate offices – this will not only support our fleet EV transition, but also support our employees with their decision to switch to electric vehicles, reducing employee commute emissions for those that drive to work.
Emissions associated with working from home also represent a proportion of Westpac’s Scope 3 upstream emissions and we’re aiming for 80 per cent of our employees to be sourcing renewable electricity for their homes by 2030. We’re working to expand our employee benefits program to make Green Power more accessible to our employees.
An emerging focus for us is embodied carbon in construction – we’re working on our baseline and opportunities and aim to set a carbon reduction target for construction and refurbishment work across our operations in 2026. It’s a huge learning exercise.
In 2022, Westpac joined the UN-convened Net-Zero Banking Alliance (NZBA). What’s the significance of this?
TP: Westpac’s NZBA commitment means that we’re setting targets to reduce our Scope 3 financed emissions – those that arise from the use of our products or financing activity.
We need to apply a greenhouse gas emissions lens across our lending decisions for relevant sectors so that we can understand the emissions profile of a customer, or potential customer, how they perform against their peers and their emission reduction strategies to meet different climate scenarios.
In accordance with our NZBA commitment, we have set a variety of interim 2030 sector targets for eight sectors in our lending portfolio.
Some of our customers in these sectors have progressed well with their transition plans and we firmly believe that supporting customers in emissions-intensive sectors will lead to better climate outcomes.
How is Westpac investing in the ESG capabilities of its team?
TP: The pathway to net-zero is complex and our customers value the help we can provide, no matter where they are on their transition journeys.
Internally we developed a broad learning program, including foundational ESG training available for all Westpac employees, and in FY22 we delivered an intermediate training partnership with Monash Sustainable Development
Institute and Climateworks Centre to upskill our bankers to better identify and manage ESG risk for customers and transactions. To date more than 1,100 of our frontline employees have completed the training.
In addition to formal training, we also have an ongoing program of ‘masterclass’ sessions for our institutional banking staff on topics such as carbon markets. Building on our depth of knowledge brings more value to the ESG conversations we have with our clients.
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