Businesses to require carbon emissions accounting

Australia’s largest business lender has said that banks will inevitably charge higher interest rates for businesses that do not provide credible sustainability plans which incorporate genuine attempts to reduce carbon footprints.

Andrew Irvine from NAB (executive for business and private banking) has made it clear that in the near future businesses will be expected to reduce their carbon emissions in order to obtain loans. In December 2023, Mr Irvine conveyed that small and medium-sized businesses will need to measure their carbon footprint and reduce their carbon emissions if they wish to keep obtaining cheaper loans. Mr Irvine stated that:
“Today I ask for your income and expense, tomorrow I will be asking for your income, expenses and carbon footprint – it’s a virtual certainty that will happen. If your abatement is less than average, your interest rate will be higher than if your abatement is higher than average. Our risk as a bank will be impacted by how green your business is. It’s not to say we won’t bank you, but the cost of borrowing will be affected.”

The comments align with perspectives shared by Anthony Miller at Westpac who predicted that by 2027 companies would be unable to secure a loan without a viable plan to calculate and cut emissions. Similarly, Lara Yocarini (global head of rural and food) from Rabobank stated that banks would in the future impose higher interest rates on farmers and rural companies that did not achieve acceptable greenhouse gas reductions.

Jonathan Moylan, who is an Australian Conservation Foundation corporate campaigner has stated that: “It was always inevitable that financial institutions would start to impose carbon pricing given the enormous risks that climate change poses to our economy…But we’d like the banks to do far more by reining in companies that are still building big new oil and gas projects.”

✅There continues to be an increase in urgency to ensure that lending institutions become more involved in reducing climate emissions as pressure mounts to ensure decarbonisation.

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Sources:

The Sydney Morning Herald: https://www.smh.com.au/business/banking-and-finance/reduce-carbon-footprint-if-you-want-cheap-finance-nab-20231207-p5epwy.html