2020
ANZ ESG UPDATENOVEMBER 2020

2020
ANZ ESG UPDATESHAYNE ELLIOTTCHIEF EXECUTIVE OFFICERMARK WHELANGROUP EXECUTIVE INSTITUTIONALOUR APPROACH TO CLIMATE CHANGE

Supporting the Paris
Agreement’s goal oftransitioning to net
zero emissions by
2050• Transition will require more than US$1.5 trillion to be invested annually in clean energy &efficient infrastructure• Bank lending will be the most significant source of funding for that investment• Supporting customers and projects that contribute to reducing emissions• Our products, services, knowledge, relationships contribute positively to transition• Understanding impacts on communities & customers - physical & transition risks

Understanding• Factoring risks & capacity to respond to climate & regulatory change in lending decisions

and managing• Encouraging largest emitting customers to build climate change mitigation & adaptation risk
into their strategies

climate risk

• Supporting customers & assessing risk through the application of our Social & Environmental
Risk Policy & Sensitive Sector requirements

FURTHER DETAIL ON OUR APPROACH TO CLIMATE CHANGE IS PROVIDED ON SLIDE 10

2

OUR 2020 CLIMATE CHANGE STATEMENTOUR PRIORITY AREAS AND HOW WE ARE MAKING CHANGE

Help our customers
by encouraging them toidentify climate risks andopportunities, create transition
plans and report publicly on
their progress

Support transitioning
industries

Reduce ourown impact

to help grow the economy

by managing and reducing
emissions from our own
operations

OUR 2020 CLIMATE CHANGE STATEMENT IS AVAILABE ON ANZ.COM/ANNUALREPORT; FURTHER DETAIL ON OUR PRIORITY AREAS IS PROVIDED ON SLIDE 11

3

OUR PATHWAY TO 2030
OUR RESPONSE TO SUPPORTING THE TRANSITION

By 2030

2020

2015

• our power generation direct lending will be
only to gas and renewables

2019

New commitments to support
efforts to achieve net zero
emissions by 2050

• reduced exposures to customers (>50%
thermal coal) without a diversification
strategy

Transition plans for
top 100• no longer bank any new business customers
with material¹ thermal coal exposures• deeper understanding of all our businesscustomers transition plans• engage with existing customers with >50%
thermal coal exposure² to seek specific, timebound & public diversification strategies• $1b+ of our sustainable finance fund now
supports disaster resilience

Support customers’ low
carbon transition•

fund & facilitate $50b by
2025•

fund & facilitate >$10b by 2020••

not finance any new build of
conventional coal fired power
plantsencourage & support 100of our largest emitting
customers’ transition
plans

•

implement strengthened due
diligence lending processes•

Our portfolio and approach

reduce exposure tothermal coal

• disclose more robust & credible metrics• own footprint and operations 100%
powered by renewable electricity• only finance the construction of new largescale office buildings if they are highly
energy efficient3• more of our commercial building lending
portfolio is comprised of highly efficient,
low or net zero carbon buildings

FURTHER DETAIL ON OUR PATHWAY AND REFERENCE FOR FOOTNOTES 1,2,3 IS PROVIDED ON SLIDE 12

4HOW OUR LENDING IS SUPPORTING THE PARIS GOALSEXPANDING OUR LENDING SUPPORT TO THE RENEWABLE ENERGY SECTOR; WHILE EXPOSURES TO THERMAL COALMINING HAS REDUCED BY ~70% IN 5 YEARSDIRECT LENDING POWER GENERATION PORTFOLIO
September 2015

September 2020

RESOURCES PORTFOLIO
$b

8%

1.7
0.6
1.3

18%

2.9

22%

THERMAL COAL EXPOSURE (EAD)
$b

20.0

5%

60%

2.0
17.3
16.1
1.2
0.4
1.1
1.7

87%

14.0
0.8
0.3
1.0

15.3
0.7
0.7
0.9

4.0

17.0
0.5
0.8
0.9

1.5

1.2

5.2

5.4

4.4
3.5

Renewables

Gas

Coal

8.6

Our direct lending to renewable energy has increased from $0.9b in

7.8

7.0

7.4

Sep-17

Sep-188.2

Sep-161.0

Sep-190.0
Sep- Sep- Sep- Sep- Mar- Sep- Mar- Sep15
16
17
18
19
19
20
20
•

Since 2015 our exposures to thermal coalmining has reduced by ~70%•

Several diversified mining customers haveacted to divest thermal coal interests inrecent years, or signalled intention to notinvest in expansionary capex•

ANZ’s exposure to thermal coal mining is asmall portion of our overall lending (nowcomprising <0.05% of our Group exposure
at default)

8.2

2015 to reach $1.5b in FY20
Sep-15

1.5

0.5

1.2

1.4

4.9

0.8
0.7
1.0

Sep-20

Thermal Coal Mining

Other Mining

Metal Ore Mining

Metallurgical Coal Mining

Services to mining

Oil & Gas Extraction
5

GROWTH IN THE FINANCING OF SUSTAINABILITY
WORKING WITH OUR INSTITUTIONAL CUSTOMERS TO FUND THE DIVERSE AND RAPIDLY GROWING MARKET

FOUR KEY PRODUCT AREAS‘Green’ andSustainability Linked
Loans‘Green’ and Sustainable
Infrastructure Project
Finance• Lending to deploy
capital into ‘green’ andsustainability
initiatives• Greenfields Project
Financing to support
the development oflong term sustainableinfrastructure• Distribution of capital
into ‘green’, andsustainability
initiatives• e.g. renewable energy,
light rail

• e.g. ‘green’ buildings,
renewable energy• ‘Green’ Loans requireborrowers to invest in
qualifying ‘green’
assets

EXAMPLES OF THE FOUR KEY PRODUCT AREAS ARE PROVIDED ON SLIDE 13‘Green’, Social andSustainability Bonds

Corporate Finance
Advisory Services for
Renewables• Providing advisory
services in relation to
the purchase, sale andraising of capital forrenewable energy
projects

6

SUMMARY OF OUR CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)

FUTURE FOCUS AREAS AND ACTIONS 2021/22
Governance• Align with regulatory guidance on climate-related risk governance• Including stress testing of selected portfolios
Strategy• Extend analysis of flood-related risks to incorporate bushfire & other risks to retail customers• Include climate risk reference in lending guidance documents for relevant industry sectors usedby our front line bankers
Risk management• Engage with 100 of our largest emitting customers on transition plans by 2021
• Customer engagement to identify customer or sector-specific transition or physical risks• Develop an enhanced climate risk management framework
Metrics & Targets• Complete transition plan engagement with top emitting customers & metrics to track progress• Target to fund & facilitate $50b by 2025 in sustainable solutions• New metrics for our financing of power generation & commercial buildings• Target to procure 100% renewable electricity for ANZ’s operations by 2025

OUR 2020 TCFD REPORT IS AVAILABE ON ANZ.COM/ANNUALREPORT; OVERVIEW OF OUR BEYOND 2020 VISION IS PROVIDED ON SLIDE 14

7

IMPLEMENTATION OF CUSTOMER TRANSITION PLAN TARGETBACKGROUND

Engage with 100 of
our largest emitting
customers
to encourage & support themto establish &, whereappropriate, strengthen theirtransition plans by 2021

MEASURING SUCCESSNEXT STEPS

Customers reporting on their transition plans by 2021
providing stakeholders with public, specific & time bound information

To date, engaged with 83 of ourlargest emitting businesscustomers on their low carbon
transition plans

Established a ‘baseline’ for how
these customers are responding
to climate-risk, (which will inform
our ongoing engagement)• Disclosing progress against
the target in our full year
reporting• Six-monthly updates to our
Executive ERB Committee
and Board EESG Committee

CUSTOMERS IN SCOPE
Customer selection process is informed by criteria including:• Direct emissions, i.e. from company owned or operated assets• Indirect emissions from their ‘value chains’, i.e. both upstream & downstream from their operational footprint• The depth of our relationships also considered to maximise prospects for engagement

EXAMPLES OF WORKING WITH OUR CUSTOMERS TO HELP THEM TRANSITION ARE PROVIDED ON SLIDE 15

8

2020
ANZ ESG UPDATEADDITIONAL INFORMATIONOUR APPROACH TO CLIMATE CHANGEWE SUPPORT THE PARIS AGREEMENT’S GOAL OF TRANSITIONING TO NET ZERO EMISSIONS BY 2050 AND ARE COMMITTEDTO PLAYING OUR PART• The global transition to net zero emissions by 2050 requires enormous investment in clean energy and efficient infrastructure¹• Bank lending makes up the most significant source of funding for this investment. This is why the decisions we make today - andtomorrow - about who and what we lend to are so important• We want to support customers and projects that contribute to reducing emissions and are resilient to a changing climate• We want our products and services, knowledge and relationships, to contribute positively to the social and economic transition alreadyunderway• By taking the actions outlined in our Climate Change Statement, we are committing to play our part in improving social andenvironmental sustainability for future generations, in line with our purpose to help shape a world in which people and communities
thriveUNDERSTANDING AND MANAGING CLIMATE RISK
• Communities and customers could be impacted by climate change – directly through increasing severity of weather events (‘physicalrisks’), or through legislative, regulatory or policy responses (‘transition risks’)• We factor these risks into our lending decisions, primarily through an assessment of our customers’ capacity to respond to climatechange and changes to regulatory environments• We encourage our largest business customers in higher emitting sectors to build climate change mitigation and adaptation
risk into their strategies. We will support and encourage what many are largely already doing in establishing andstrengthening specific, time bound and public transition plans and diversification strategies• Through our Social and Environmental Risk Policy and our requirements for our lending to ‘sensitive sectors’ - energy, extractive
industries, forestry and forests, water, military equipment and hydropower - we support customers who strive to improve their social andenvironmental performance
1.

International Energy Agency estimates US$1.5 trillion annually.
10

OUR 2020 CLIMATE CHANGE STATEMENTDURING THE YEAR, WE REVIEWED OUR APPROACH TO CLIMATE CHANGE TO ENSURE WE ACT IN SUPPORT OF CUSTOMER,COMMUNITY AND GOVERNMENT EFFORTS TO FACILITATE AN ORDERLY AND JUST TRANSITION TO NET ZERO EMISSIONS BY
2050
OUR PRIORITY AREAS AND HOW WE ARE MAKING CHANGE
Help our customers
by encouraging them to identify climate
risks and opportunities, create transition
plans and report publicly on theirprogress•Engage with 100 of our largest emitting customers
to support them to establish and strengthen
their transition plans by 2021••

Disclose better metrics so the emissions impact ofour financing can be tracked annually, starting withcommercial property and power generation. From
2021 will set targets to reduce the financed emissionsof each sector between now and 2030

•

•

•

Ensure discussion of climate risk becomes part ofour everyday client engagement to have a deeper
understanding of all our customers’ transition plans.
Over time, we will move away from working with anylarge business customers that do not have clear andpublic transition plans

Fund and facilitate at least $50 billion by 2025
towards sustainable finance to help our customer’s
lower carbon emissions. We will allocate $1 billionof this towards supporting customers’ andcommunities’ disaster recovery and resilience

Reduce our own impact
by managing and reducing emissions
from our own operations

Support transitioning industries
and help grow the economy•••

Further reducing the carbon intensity of our electricity
generation lending portfolio by only directly financing low
carbon gas & renewable projects by 2030
Continuing to support diversified customers, which meansno longer banking any new business customers withmaterial¹ thermal coal exposures.
Engaging with existing customers who have more than
50% thermal coal exposure² to support existing
diversification plans. Where these are not already inplace, we will expect specific, time bound and public
diversification strategies by 2025. We will cap limits tocustomers which do not meet this expectation and reduce
our exposure over time³
Not directly financing any new coal-fired power plants
or thermal coal mines⁴, including expansions. Existing
direct lending will run off by 2030.
Only financing the construction of new large-scale
office buildings if they are highly energy efficient, andbeing built to either at least a NABERS⁵ 5-star energy ratingor 5-star Green Star Design rating (or equivalentinternational rating)•Accelerating our own emission reductions bysourcing 100% of the electricity needed for ourbusiness operations from renewables by 2025•

Setting public targets to lower our greenhousegas emissions by 24% by 2025 and 35% by 2030
(against a 2015 baseline)•

Equipping our employees with knowledge andtraining to minimise their own environmental
footprint•

Note: Further updates on our progress to minimise
our own carbon footprint can be found in ANZ’s ESG
Supplement•

https://www.anz.com.au/about-us/sustainability/

1. More than 10% revenue, installed capacity or generation from thermal coal. 2. We will progressively reduce the 50% threshold so that by 2030 we will seek a diversification strategy from mining,transport and power generating customers with more than 25% thermal coal exposures 3. We will continue to provide rehabilitation bonds for those existing customers with some thermal coal exposure
to ensure their responsibilities with exiting mine sites are fulfilled, and transaction banking / markets 3-day settlement limits. 4. These are mines whose reserves or production are at least 35% thermalcoal. 5. NABERS (National Australian Built Environment Rating System) is a rating system measuring the environmental performance of Australian buildings, tenancies and homes, e.g. energy efficiency,
water usage, waste management and indoor environment quality

11

OUR PATHWAY TO 2030
OUR RESPONSE TO SUPPORTING THE TRANSITION HAS EVOLVED OVER TIME, AND TO DATE, WE’VE MADE STRONG PROGRESS

2015
Facilitate orderly transition:••

Fund & facilitate >$10b by 2020 tosupport customers transition to low
carbon economy

Consider financing new coal fired power
plants only if using advanced technology& higher quality thermal coal•Not finance any new build of
conventional coal fired power plants•

Implement strengthened due diligencelending processes to coal mining,transport & power generation

Support customers’ transition to low
carbon economy:••

Provide finance & advisory services,energy efficiency improvements, lowcarbon energy generation, resilient
infrastructure & carbon abatement
Direct investment through green bondsthat develop low or zero emissions
industries, technologies & practices

2019
Renewed commitments to facilitate
orderly transition:•

Fund & facilitate $50b by 2025 tosupport customers transition to low
carbon economy•

Encourage & support 100 of our largest
emitting customers••

Reduce exposure to thermal coal: Focus
on existing customers that produce
higher quality coal, only lend to new
customers where thermal coal
operations are <50% revenue, installedcapacity or generation

By 2030

2020

Our portfolio and approach will look
like this:New commitments to support efforts
to achieve net zero emissions by
2050:

•

Continue to support diversified
customers, which means we will nolonger bank any new businesscustomers with material¹ thermal coal
exposures

Our power generation direct lending will
be only to gas and renewables (as we
will have exited all direct lending tocoal-fired power generation and thermal
coal mines)•

We will have reduced exposures tocustomers (>50% thermal coal
exposure) without a diversification
strategy•

We have a deeper understanding of all
our customers transition plans, asclimate-risk forms part of our everyday
client engagement•$1b+ of our sustainable finance fundnow supports disaster resilience•

Our own footprint and operations 100%
powered by renewable electricity•

More of our commercial building lending
portfolio is comprised of highly efficient,
low or net zero carbon buildings

•

•

•

We will not finance any new build of
conventional coal fired power plants•

Engage with existing customers with>50% thermal coal exposure² to seek
specific, time bound and public
diversification strategies by 2025. Ifthey don’t, we will cap limits and reduce
exposure over time
Disclose more robust & credible metrics
so the emissions impact of our financing
can be tracked: beginning with power
generation and commercial property,
and disclosed annually. Targets will be
set by 2021 to reduce financed
emissions for each sector up to 2030
Only finance the construction of newlarge-scale office buildings if they arehighly energy efficient, and being built
to either at least a NABERS³ 5-starenergy rating or 5-star Green Star
Design rating (or equivalentinternational rating)

1. More than 10% revenue, installed capacity or generation from thermal coal. 2. We will progressively reduce the 50% threshold so that by 2030 we will seek a diversification strategy from mining,transport and power generating customers with more than 25% thermal coal exposures. 3. NABERS (National Australian Built Environment Rating System) is a rating system measuring the environmental
performance of Australian buildings, tenancies and homes, eg energy efficiency, water usage, waste management and indoor environment quality

12

GROWTH IN THE FINANCING OF SUSTAINABILITYOUR SUSTAINABLE FINANCE, CAPITAL MARKETS, PROJECT FINANCE AND ADVISORY TEAMS WORK WITH INSTITUTIONAL
CUSTOMERS TO FUND THE DIVERSE AND RAPIDLY GROWING MARKET, ACROSS FOUR KEY PRODUCT AREAS

Scope‘Green’ and Sustainability Linked
Loans‘Green’ and Sustainable
Infrastructure Project Finance‘Green’, Social and Sustainability
Bonds

Corporate Finance Advisory
Services for Renewables

Lending to deploy capital into ‘green’and sustainability initiatives.

Greenfields Project Financing tosupport the development of longterm sustainable infrastructure, e.g.
renewable energy, light rail.

Distribution of capital into ‘green’, andsustainability initiatives, for example‘green’ buildings, renewable energy, andthe provision of hospitals and schools.

Providing advisory services in relation
to the purchase, sale and raising of
capital for renewable energy projects.

In August 2020, ANZ provided $90
million in financing for CPE
Renewable Investment Unit Trust

In September 2020, ANZ jointly arranged
Mercury NZ Limited’s inaugural Green
Bond. Mercury is an electricity retailer
and generator providing around 16% of
New Zealand’s total electricity
generation.

In 2020, ANZ completed an equity anddebt raising for the Yandin Wind Farm,a 214 MW wind farm in mid-west
Western Australia.

Green Loans require borrowers toinvest in qualifying ‘green’ assets
such as green buildings, renewableenergy or low carbon transport
projects.
Sustainability-Linked Loans can beused for general corporate purposeswith pricing linked to improved
sustainability performance.

ExampleIn 2020, ANZ arranged a US$450
million syndicated Green Loan
facility for SK Battery America, Inc.,a subsidiary of one of Korea’s largest
energy companies, SKI, with a focus
on expanding Electric Vehicle Battery
capacity.

This transaction will fund thedevelopment and acquisition ofbehind the meter solar, battery,thermal and renewable energy
systems.

The NZ$ 200 million seven-year ‘Green’
Bond proceeds will fund the constructionof the Turitea wind farm, expected to be
New Zealand’s largest wind farm.

The project achieved electrificationand commenced delivery of energy to
the grid in July this year. Oncecompleted, Yandin will be Western
Australia’s biggest wind farm providing
renewable energy to over 200,000
households a year.

13

SUMMARY OF OUR CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
THROUGH OUR TCFD REPORTING, WE SEEK TO PROVIDE INFORMATION ON OUR APPROACH TO CLIMATE CHANGE AND
ABILITY TO MANAGE THE ASSOCIATED RISKS AND OPPORTUNITIES.

BELOW IS A SUMMARY OF FUTURE FOCUS AREAS AND ACTIONS.

TCFD Theme

Focus Areas 2021/22

Beyond 2020 Vision

Governance•Align with regulatory guidance on climate-related risk governance,
including stress testing of selected portfolios•

An enhanced risk management framework that
anticipates potential climate-related impacts, andassociated regulatory requirements

Strategy•

Extend analysis of flood-related risks to incorporate bushfire and otherrisks relating to retail customers
Include climate risk reference in lending guidance documents for relevant
industry sectors used by our front line bankers•

ANZ business strategy more closely aligned to a resilientand sustainable economy that supports the Paris
Agreement and Sustainable Development Goals

Support 100 of our largest emitting customers to develop and disclose
their transition plans
Customer engagement to identify customer or sector-specific transition or
physical risks
Develop an enhanced climate risk management framework thatstrengthens our governance and is responsive to climate change•

Further integrate assessment of climate-related risks into
our Group risk management frameworkStandard discussions with business customers include
climate-related risks and opportunities
Assessment of customer transition plans part of standard
lending decisions and portfolio analysis

Complete transition plan engagement with high emitting customers andconsider how to integrate into regular customer assessments
Target to fund and facilitate $50b by 2025 in sustainable solutions
New metrics for our financing of power generation and commercial
buildings to demonstrate how we are taking steps towards the goal of net
zero emissions by 2050
Target to procure 100% renewable electricity for ANZ’s operations by
2025

•

•

Risk Management•••

Metrics & Targets

•
•
•
•

•
•

•

Continue to evolve our reporting with leading practices tomeasure the alignment of our lending with the Paris
Agreement goals
Reduce ANZ’s operational emissions in line with thedecarbonisation trajectory of the Paris Agreement goals

14

WORKING WITH OUR CUSTOMERS TO HELP THEM TRANSITIONWITHIN EACH INDUSTRY OUR CUSTOMERS HAVE DIFFERENT STARTING POINTS & TRANSITION PLANS VARY DEPENDING ON
THE SECTORSOME SECTOR-SPECIFIC MEASURES WE ENCOURAGE ARE

CASE STUDY: WESFARMERSEnergy•Diversified operations
across 30 retail andindustrial businesses.

•

Consumer brands such as
Bunnings, Kmart andOfficeworks, but alsointerests in fertilizers,
chemicals and in theenergy sector.

•

In September 2020, Wesfarmers announced an accelerated
agenda to set and achieve net zero emissions for its retail
operations by 2030, and its industrial businesses by 2050. Thisis on top of existing 2025 emissions reduction targets.

•

Wesfarmers is pulling on numerous levers to significantly
reduce its emissions.

•

Investing heavily in energy efficiencies in its retail businesses
through new technology, solar panels and LED.

•

In its industrial business, investing in technologies to reduce
emissions intensity.

•

ANZ has banked Wesfarmers since the 1980s and is supporting
it on its transition journey.

••

Example: we encourage customers looking to diversify their energy
sources towards less carbon-intensive fuels. If diversifying isn’t possible
within the timeframe (to 2030) we work with them to help identify how
their business can be resilient under scenarios where demand for theircommodities declines more rapidly than a ‘business as usual’ scenario
Our engagement has focused on customers with thermal coal
operations. We are now broadening this to include major upstream oil
and gas producing customers

Transport•

Example: an airline sector customer has committed to carbon neutral
growth from 2020 and halving 2005 emissions from international flights
by 2050, aligning with the goals of the international aviation sector•

We encourage customers moving towards more fuel-efficient vehicle
fleets or taking other steps, such as switching from road to rail transportthat will reduce their carbon emissions

Buildings••

Example: a number of customers have established and are now
implementing net zero carbon 2030 targets, to be achieved mainly by
improving their energy efficiency and installing solar onsite.
We encourage property developers or retailers to reduce building energy
consumption and refrigerant-based emissions using the best available,commercially viable technologies

15

FURTHER INFORMATIONOur Shareholder informationanz.com/shareholder/centre/

Equity Investors

Jill Campbell

Cameron Davis

Retail Investors

Debt Investors

Michelle Weerakoon

Scott Gifford

Group General Manager
Investor Relations+61 3 8654 7749
+61 412 047 448
jill.campbell@anz.com

Manager Shareholder
Services & Events+61 3 8654 7682
+61 411 143 090
michelle.weerakoon@anz.com

Executive Manager
Investor Relations+61 3 8654 7716
+61 421 613 819
cameron.davis@anz.com

Harsh Vardhan

Manager
Investor Relations+61 3 8655 0878
+61 466 848 027
harsh.vardhan@anz.com

Head of Debt Investor
Relations+61 3 8655 5683
+61 434 076 876
scott.gifford@anz.com

DISCLAIMER & IMPORTANT NOTICE: The material in this presentation is general background information about the Bank’s activities current at the date of the presentation. It is information given insummary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial
situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriateThis presentation may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to ANZ’s business and operations, market conditions,
results of operations and financial condition, capital adequacy, specific provisions and risk management practices. When used in this presentation, the words “estimate”, “project”, “intend”, “anticipate”,“believe”, “expect”, “should” and similar expressions, as they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance onthese forward-looking statements, which speak only as of the date hereof. Such statements constitute “forward-looking statements” for the purposes of the United States Private Securities Litigation
Reform Act of 1995. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof toreflect the occurrence of unanticipated events.
16