Rebekah Cain: Why banks matter in the push to decarbonise the economy

Of Interest

Like it or not banks are a cornerstone of our economy, meaning they'll need to be a key influence in the push to decarbonise.

One of the ways BNZ is trying to do this is through membership of the Net-Zero Banking Alliance (NZBA).

Speaking in interest.co.nz's Of Interest podcast Rebekah Cain, BNZ's Chief Sustainability Officer, describes the NZBA as "a group of banks committed to transition the finance sector to net-zero." Finance, she notes, is "a key lever to pull in order to shift the real economy."

"Part of the reason for this is because if something is funded it happens. And if it isn't funded it doesn't happen," Cain says.

The industry-led, United Nations convened NZBA has 133 bank members from 43 countries holding a combined US$74 trillion in total assets, which is estimated to be 41% of global banking assets. BNZ's the only New Zealand member, although the Aussie parents of all NZ's big four banks are members, as is the Dutch parent of rural lender Rabobank NZ.

BNZ's NZBA targets disclosureinitially features2030 targets for the coal mining, dairy farming, power generation and oil and gas sectors. For dairy, which contributes 23% of NZ's annual export earnings and 22% of its annual gross emissions, the target assumptions include reducing dairy cow numbers, lowering milk production, and less use of nitrogen fertiliser.

For BNZ Cain acknowledges there's both derisking going on and lending growth opportunities being eyed. In terms of the latter, in the power generation sector BNZ's assuming a 50% increase in electricity demand between 2020 and 2050.

"I think the focus needs to switch from what's being taken away to the opportunity that exists," she says.

NZBA criteria features 10 sectors banks needs to have targets for. That means by November next year BNZ must also have targets in place for other parts of the agriculture sector such as sheep and beef, and residential real estate where it has its biggest lending exposure.

The NZBA has been criticised with Germany's GLS Bank quitting in February over concerns about US bank members continuing to support oil, gas and coal projects in emerging markets.

"Any of these initiatives are only valuable if they are interrogated and criticised. Otherwise it's really easy to sign-up, set and forget, not really report on it," Cain says.

Due to being part of the NZGA and NZ's new mandatory climate-related disclosure regime, Cain says BNZ's having internal conversations they were never having before.

"So that has got to be good."