Transcript
For release: 19 June 2023

ANZ ESG Forum – Q&A (Abridged)
Shayne Elliott:

Operator, we’ll open up for questions.

Operator:

Your first question comes from Rob Koh with Morgan Stanley. Please goahead.

Rob Koh:Good afternoon. Thank you very much for the presentation today.
Maybe can I try two questions? Just one in relation to housing
affordability: what are your data insights telling you about which
particular areas of the community - maybe by geography or by othercategories - are most impacted at the margin?

Shayne Elliott:

Sure. Actually it’s a good question. I’ll put Kevin on notice if he wants toadd to my answer, Our Chief Risk Officer.
Actually it’s interesting, Rob, in that there don’t appear to be any
particular indicators. There’s certainly no geographic overlay like we’veseen in the past. You’d be aware that over the last 10 years or 15 years
when we’ve had periods of stress, it’s more acutely felt, perhaps, inWestern Australia or other parts of the country. That’s not the case at
the moment, so there’s no geographic overlay.
Surprisingly, despite much talk about the fixed rates - the so-called cliff- our evidence to date in our own book is that people who have actually
moved from a fixed rate to a floating rate are actually performing, onaverage, better than others. There’s some reasonable hypothesis of whythat might be the case, in terms of their ability to prepare well inadvance for that. So, that hasn’t typically been an indicator.
It's really a relatively – and again, I don’t mean to diminish it - small setof indicators. People who bought more recently are more likely at thetop, those that had to really stretch themselves to get into the market,
and then of course, the real indicator is those that have less secure
employment.
At the end of the day, what we’ve found is those that do have a homeloan - irrespective of when they got it - have largely been quite wellequipped to manage, despite the number of rate rises. It’s really as longas they have a job, they’ve been able to work themselves through.
That’s reinforced even when we look at things like our hardship cases.

Kevin Corbally:

Shayne, the only other thing I’d add is it’s still the same factors that wesaw before, in terms of loss of income, marital breakdown or healthissues are the key drivers. There’s been no change to that in terms of
the reasons why some customers have found themselves in stressful
situations. Otherwise, what you said I think covers all the key points.
Thank you.

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

Rob Koh:Thank you, Mr Corbally, thanks, Mr Elliott. My next question: obviously
in dealing with this and anticipating this, you’ve talked a lot about extra
algorithms and extra data analytics.
Can you just give us an update on how you’re thinking about potential
risks with that, things like algorithmic bias and the like?

Shayne Elliott:

That’s a very good question. I think the point there was at some level,
we’re at war here with - this was relating to Kath’s comments and inparticular around scams. As we know, sadly there's a significant industryof scammers out there and they're continually evolving the way thatthey are tricking and defrauding customers.
What we try to do, in addition to just good old-fashioned good people
oversight, whether it's our people and our branches or on the contact
centre, to deploy technology as much as we can to look for unusual
patterns. Those algorithms are really designed to look for things that are
unusual in your account activity.
We weren't really referring to any algorithms that might - and I
understand the nature of your question that it could be biased in thesense of approving credits, for example. That's a separate area and we
obviously do use technology for credit approvals, et cetera.
Again, Kevin, sorry to shake you up, you might want to talk about thatin terms of bias. But Rob, just while Kevin's getting ready on thatquestion about credit approval, but Kath's comments were really more
about how do we help customers.
You'll be aware of the Falcon program that we've had for many, manyyears, in fact decades, overseeing credit card transactions to identify
potential fraud. It's really just an extension of that and it will be an
ongoing piece of work. Do you want to talk about it from a creditperspective.

Kevin Corbally:Yes. Just if I can add to what you also said, Shayne. I think when wetalk about algorithms, what we're specifically looking at is individuals
who we can see from previous history what's happened at certain timesof a month when payments are due, it's that type of stuff that we lookat from that side. From a credit perspective, we're acutely conscious of
the fact that we need to be aware of the impact of some of the biases
that can be built in.
What I would say is that no decision in its own right is just made bymachine; there's obviously the opportunity for customers to either
appeal a decision or alternatively, decisions which are going to be
negative automatically get flicked to a human being to also reassess as
well. So, I wouldn't say there can be bias but there's the opportunity forhuman intervention would be the point I'd make on the credit side.

Operator:

Your next question comes from Carlos Castillo with Melior. Please goahead.

Carlos Castillo:

Good afternoon, team. A few questions from me. I might just fire them
all at you and then allow you to respond as you see fit.
The first one, nature. It's good to hear that you've extended those
discussions with the largest emitting customers to consider the nature
impacts they're having but I'm interested to understand more broadly
across the business how you're incorporating nature-related risks into

lending decisions for those that are exposed to the adverse
consequences of biodiversity loss, et cetera.
The second question, just around the requirement for non-financial KPIs
to be incorporated into LTI as part of the APRA remuneration reforms
and just whether you've come to a landing yet on what those nonfinancial KPIs might be.
Then thirdly, we've had the Voice legislation pass Parliament today forthe referendum to go ahead. Just interested to understand what you'replanning to do in the lead-up to the referendum in terms of yourworkforce and the broader community.
Shayne Elliott:

Yes. If you don't mind, we'll answer them in reverse order. I'll takenumber 2 and 3. In terms of the Voice, ANZ is a supporter of the Voiceand we have - and how has that manifested itself? That has manifested
itself in terms of financial support, so we have provided some financial
support to the Yes campaign. We will be - internally with our staff, wesee this as an obligation around education.
In fact, I think our first educational piece, literally I saw it over theweekend. We'll start a series of interactions with our staff to educate
them about the constitution and its history, what are the proponents interms of the Voice asking for, and why. That will be essentially theextent of it.
We will not be engaging directly with our customers on the Voice. It's
really just restricted to an educational campaign and respecting people's
freedom of choice and people will come to their own opinions, to makesure that they do so on an educated basis internally. There'll be a rangeof activities we do.
Our support for the campaign has been relatively below the line or
relatively quiet and that's - given the discussions we had had with theYes campaign we thought that was the most appropriate way for us todo that.
Then finally, as part of it we've also been educating ourselves in termsof the Voice and that means interacting with leaders from the Uluru
Statement from the Heart interacting with people at our Board andexecutive so that we ourselves were better educated about it. That was
the position on the Voice.
Look, that may change over time. We're really very much working
hopefully hand in hand with the From the Heart campaign to make surethat our involvement is helpful and that's the approach we'll continue totake as it evolves.
In terms of the non-financial KPIs for APRA, we haven't determined thatat this point. It's a great question, and it's a classic dilemma where
many of our shareholders would prefer we didn't have non-financial KPIs
at all but we accept that that's now part of the requirement with APRA.
So, we're working that through with the Board. It's fair to say - yourquestion was around LTI.
It's fair to say that in our balance scorecard, more broadly we've always
had non-financial KPIs or certainly a range of metrics that we think areimportant in terms of driving fair and balanced outcomes for allstakeholders.

Those include areas like gender diversity or employee satisfaction orNPS scores or some of the other factors that we've always taken into
account. What we're working - it's not really a huge stretch for us, it's
really just - your question is it's really applied in terms of this new
standard with respect to the LTI and so that is still up for the Board to
decide later in this year, but we will.
Then Mark, did you want to talk about the nature piece?
Mark Whelan:

Yes. I'll start with that and I think Kevin will probably add to that aswell. I think it's fair to say, Carlos, that we're at what I'd call an
exploratory stage on biodiversity. One of the things that we're learningwith regards to this, while there is certainly a number of our customers
looking at this issue, the amount of clear data around this and also theneed for clarity I think with regards to the disclosures that will be
required in this space are still pretty much under development.
We recently visited the UK and Europe again to just get some more
information around how other banks and regulators are looking at thisparticular issue. I don't know if you want to add some stuff on that,Kevin, because you were on the tour.

Kevin Corbally:Yes. Just to what Mark was saying, I think it was evident from Europe
and the UK that probably our customers are less progressed in terms ofsetting targets and disclosures and I think for a lot of banks they're stillfinding their feet.
What I'd also add in terms of our own credit assessment in line with ourown social and environmental risk policy, we do expect our businesscustomers to use international best practice to manage any potential
biodiversity impacts, and our own land acquisition statement also
acknowledges that we will not knowingly support any transaction oralternatively any customer who's involved or could impact on a culturally
or environmentally sensitive area.
Think of areas such as World Heritage areas or Ramsar list wetlands andother nature conservation parks et cetera. They're already built into ourown credit policy at this stage.

Operator:Thank you. Your next question comes from Guy Shearman with Aware
Super. Please go ahead.

Guy Shearman:

Good afternoon, all. Thank you for the brilliant presentation. Just theone question from me today. It's related to Traditional Landowners andobtaining free, prior and informed consents, noting that there are someexamples of companies who have had delayed projects as ethics had notbeen obtained.
I'm wondering how are ANZ assessing lending to projects that havecultural heritage, Indigenous community impacts and whether free,prior, informed consent is a requirement.

Shayne Elliott:

It's a great question. I'm looking at Kevin and Mark to give a more
informed answer.

Kevin Corbally:

I think the short answer to the question is that that is factored into thedecision-making process so it is something that we do consider at thatpoint in time, yes.

Operator:Thank you. Your next question comes from Richard Wiles with Morgan

Stanley. Please go ahead.
Richard Wiles:

Hi, Shayne. Good afternoon. Just referring to slide 16 on your financeemission targets. You say there that they'll - you remain on track by theend of 2024 to set interim targets for nine priority sectors. It looks likeyou've got eight there at the moment so what's the ninth one please?

Mark:Yes. We've got power generation, large-scale commercial real estate, oiland gas as you're saying there, which is six, then thermal coal and thentransport. The others obviously that we'll be looking at will be - which
you’re seeing offshore as well - will be eventually residential mortgages
and agri.
Those two I would - I think the discrepancy between the eight and say
10 which I've just referenced there, Richard, is coal, to be frank, which
we've already made significant inroads on as you're aware. With the twothat I just mentioned though, there is significant data issues associatedwith that so we'll be hastening slowly with regards to the disclosures orour approach on that while we can gather up more information.

Richard Wiles:

Okay. Thanks, Mark. Then I think I’m correct in saying your exposure tooil and gas, and power (generation) is a little bit higher than some ofyour major bank peers. You've got targets in place for each of those. I
think for oil and gas it's a 26% reduction versus the FY20 baseline andfor power (generation) I think it's a 50% reduction versus the FY20
baseline. How are you going on those two sectors under the targets?

Mark Whelan:

Thanks, Richard. Our glide path on those are back into where weexpected to be. You'll note last year we saw a blip, an increase,particularly in the energy side, the power generation side, simply
because with the volatility that you saw in the market and very highenergy prices, we saw some customers that we needed to support in theshort term, and we did that on the basis that it was on the short term.
Those facilities have now been repaid and we're now back on that glide
path to the 2030 targets that we'd talked about

Shayne Elliott:

I think it's worth pointing out that there was a financial exposure
increase but that financial exposure did not lead to greater emissions
from those customers. It was the price of production had gone up and so
the mathematical outcome of that was a higher exposure but it wasn't
that we were contributing to an increase in emissions.

Operator:

Your next question comes from Jane Wu with Future Fund. Please goahead.

Jane Wu:

Thank you. Good afternoon. Thank you very much for the presentation.
I'm going to take you to a topic that hasn't been covered so far: modernslavery. I wanted to just go to one of the things you mention in yourreport about working with law enforcement agencies, and particularly
with the financial crime team's investigation into banking activities.
There's the case where you identified a possible case of modern slavery
and then you then referred this through to the enforcement agency. Can
you explain at what point does ANZ actually bring that to an agency's
attention, and in the case where you did do this, did you get any
feedback from the authority or agency?

Shayne Elliott:

Yes, I can do that. It's a great question, Jane.
Sadly, we do have situations where through our normal monitoring of

transactions, something might flag as suspicious. So, as you know, wehave a bunch of obligations with AUSTRAC when things are related tomoney laundering but we also have an obligation, anything that is just a
suspicious matter, and that's a reasonably wide definition.
As soon as we are aware of something that is defined as suspicious, wereport it, essentially immediately. It's then for those authorities to thenhandle it from there, and then that may require - for example,
sometimes they would require us to close the account immediately.
Sometimes they might ask us to continue to operating the account while
they conduct their investigation. We don't typically get - we werechatting about this before – we don't typically get specific feedback on acase-by-case basis.
As you can imagine, there's confidentiality issues, et cetera, and it'sreally for the authorities to deal with, but more broadly we get feedback
about the fact that our effective monitoring of such situations is helpful
and a very important part of the overall process. Kevin, did you want to
add to that?
Kevin Corbally:

The only thing, Shayne, that I'd add to what you said is that that
information that we would have passed on to AUSTRAC, they would
have then passed on to whatever the appropriate agency was.
In turn, AUSTRAC, through regular dialogue that it has with otherfinancial institutions, it will share some of those insights with the otherfinancial institutions so that they can in turn fine-tune the filters thatthey've got.
Similarly, if another institution picks something up that for whateverreason our filters hadn't, that gets shared with us as well. That's
probably the only other thing, Shayne, that I'd mention.

Jane Wu:

In terms of this aspect of monitoring, which obviously has been effective
because you've actually been able to identify a suspicion which has thenbeen referred on, what has the bank actually done in terms of that
aspect of this business to learn and address and improve its process?

Shayne Elliott:

Great question. Kevin?

Kevin Corbally:Yes. Look, for a number of years we've built that into our algorithms andour filters, so well before modern slavery legislation even came in. What
we have done, however, over the last couple of years is to continue tofine-tune it, enhance it, and particularly as we learn and as law
enforcement and AUSTRAC and other agencies learn and they pass thatlearning on to us as well.
We obviously did a review when modern slavery legislation came out but
we've used the information we get from the other agencies to enhance
what we do.

Operator:Thank you. There are no further questions at this time. I will now handback to Mr Elliott for closing remarks.

Shayne Elliott:

Okay. Thank you very much for your time today. Hopefully, you will
understand this is an important area for us and since 2018 we've felt it
was appropriate that we spent appropriate and sufficient time dealing
with issues of ESG. While we do so on a separate day, in a separateway, I don't want it to be lost on people; we do see this as an integrated

part of the way that we run the bank. It's just core to who and what weare in terms of our purpose.
It doesn't mean we get everything right. It's a constant area of learning,and I think if I may, a couple of areas of important learning at themoment for us all are particular around nature and biodiversity, andthat's a very steep learning path that we're all on as a bank and I think
we are progressing pretty well on that and we'll have more to share
undoubtedly next time we get together.
The other one is around scams. While it's very easy to look at scams justas a purely financial outcome, it's more than that. Really, thesophistication of the criminal activity on that means that we need to be,as an industry but also as ANZ, investing very, very heavily and reallytrying to innovate new ways to protect our customers, but as we know,
the best thing for customers to do is always be extremely vigilant, andit's our responsibility to continue not only education but to protect themas best we can.
They are the two major areas, and then I mentioned the moreexistential risk around housing and affordability which again, given it's
so core to who and what we are as a bank here in Australia and New
Zealand, will continue to be an area of focus for us.
As I mentioned in my speech, we hope to contribute to the national
dialogue about long-term solutions, and not for a minute suggesting thatany of those solutions will be easy.
Thank you very much for your time today and we enjoyed yourquestions. Thank you.
ENDS