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Speaker 1: Welcome to the Fear and Greed business Interview. I'm sure

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Speaker 1: and Alma. Australia's big banks are under pressure over their

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Speaker 1: role in the energy transition, with a leading ethical fund

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Speaker 1: manager filing shareholder resolutions with two of the big four,

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Speaker 1: Australian Ethical is calling on Westpac and National Australia Bank

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Speaker 1: to provide more detail on their customer climate transition plans.

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Speaker 1: Westpac's AGM takes place today, a year after Australian Ethical

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Speaker 1: Lodge to protest resolution calling for a broader application of

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Speaker 1: policies to shift customers to greener energy sources. The fund

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Speaker 1: manager says the bank has made no progress in the

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Speaker 1: last twelve months, so they're doing it again. Alison George

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Speaker 1: is the head of Impact and Ethics at Australian Ethical.

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Speaker 1: Australian Ethical works with Blue Chip Communication, a great supporter

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Speaker 1: of this podcast. Allison, Welcome to Fear and Greed.

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Speaker 2: Hi Sewan Lovely to be here.

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Speaker 1: Before we talk about the banks, just explain how Australian

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Speaker 1: Ethical invests because there's a real four purpose in what

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Speaker 1: you do that's right.

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Speaker 2: We sometimes call it doing well and doing good, So

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Speaker 2: what we mean by that is that it's absolutely critical

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Speaker 2: that we deliver strong financial returns for our investors. And

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Speaker 2: we've been doing ethical investment for nearly forty years and

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Speaker 2: that long track record that we have is a great

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Speaker 2: proof point that you don't need to sacrifice returns to

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Speaker 2: do the right thing. But we also want to do good,

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Speaker 2: that is to improve outcomes for people, planet and animals.

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Speaker 2: So we do that in the way that we invest,

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Speaker 2: avoiding the bad things and leaning our capital into future

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Speaker 2: focused industries that are contributing to better outcomes in the future.

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Speaker 2: And we do that in how we show up as investors,

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Speaker 2: so how we use our position and our voice to

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Speaker 2: call for positive change. So these shareholder proposals that we're

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Speaker 2: talking about today are part of that driving positive change.

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Speaker 1: Okay, so there's kind of two parts of these. There

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Speaker 1: is that presumably assets that just won't invest in, and

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Speaker 1: that's that. But what we're talking about is using the

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Speaker 1: influence of superannuation funds generally, but it's joining ethic or

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Speaker 1: particularly to make a difference. What is it let's start

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Speaker 1: with Westpac AGM today. What is it that you think

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Speaker 1: they're not doing that they should be doing.

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Speaker 2: Right, So, what we're really doing is calling for more.

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Speaker 3: Detail about a key part of their climate change approach.

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Speaker 2: All four of the Big four banks have committed to

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Speaker 2: align their lending with the global climate change goals that

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Speaker 2: set out in the Paris Agreement. We like that commitment.

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Speaker 2: We think that that's appropriate. So what we really want

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Speaker 2: now is to see the banks get on with that job,

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Speaker 2: to do it in a robust way and in a

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Speaker 2: way that takes their customers on that climate transition journey.

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Speaker 1: What's that mean, I'm going to ask Allison in practical terms.

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Speaker 2: In practical terms, so the banks themselves, they're in a

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Speaker 2: trusted position in relation to a whole range of business

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Speaker 2: across the economy. They know a lot about those businesses

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Speaker 2: and they also know about what climate change is going

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Speaker 2: to mean for them. So it's about the banks going

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Speaker 2: and having conversations and talking about the company's future plans

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Speaker 2: and how they're building a resilient business for a range

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Speaker 2: of different scenarios, especially a low carbon one and for

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Speaker 2: a changing climate. So what the banks have said is

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Speaker 2: that they will expect high emitting customers to have a

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Speaker 2: climate transition plan and that that plan needs to be credible.

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Speaker 2: But there's still key details missing about what the bank

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Speaker 2: is going to expect of what is credible.

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Speaker 1: So you're not asking them to not lend to higher metters,

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Speaker 1: but you are saying, we want to make sure that

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Speaker 1: you're using your influence bank Westpac in this instance to

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Speaker 1: put pressure on the higher meters to transition. Is that

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Speaker 1: kind of.

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Speaker 2: That's absolutely right. The aim is not to see the

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Speaker 2: banks withdraw lending from the customers that are getting on

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Speaker 2: the climate transition, but they're in a really good position

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Speaker 2: to judge who is for those that are not taking

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Speaker 2: it seriously. They can provide that much, and we think

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Speaker 2: that it's important that there is a consequence that actually

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Speaker 2: ongoing lending is tied to.

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Speaker 3: Doing the right thing and preparing your business for a

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Speaker 3: low carb and future.

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Speaker 1: If I'm west Pack, I'm going to say to you, well,

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Speaker 1: there's a lot of this is commercial in confidence. So

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Speaker 1: there's a lot of stuff here that we can't talk

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Speaker 1: to about. How do you overcome that part of it?

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Speaker 2: Yeah, So we're not asking for details on the customers.

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Speaker 2: We're asking on details of the approach. So we want

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Speaker 2: to know what they are looking for in general when

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Speaker 2: they're going and look at these plans. So one of

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Speaker 2: the gaps, for instance, is we don't know the extent

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Speaker 2: which they're looking at the company's plans to invest for

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Speaker 2: the future, so their capital expenditures. Are they going to

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Speaker 2: check that this climate transition plan that a Hiameta has

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Speaker 2: involves enough capital being deployed into reducing emissions, But are

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Speaker 2: they also going to check what capital is being deployed

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Speaker 2: into old high emitting technology that may not be aligned

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Speaker 2: to a low carbon future, that could even become a

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Speaker 2: stranded asset as transition progress.

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Speaker 3: So we want to know that they're looking at both

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Speaker 3: of those things.

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Speaker 1: Stay with me, we'll be back in a minute. I'm

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Speaker 1: speaking to Alison George, head of Impact and Ethics at

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Speaker 1: Australian Ethical. Okay, so we're talking about Westpac National Australian

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Speaker 1: Banks agms next week. Are all the banks more or

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Speaker 1: less the same or are some better than others?

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Speaker 2: So there's definitely a differentiation here. We've lodged proposals at

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Speaker 2: both NAB and west Pac, and we've lodged proposals at

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Speaker 2: both of those banks last year as well, but the

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Speaker 2: progress that the two have made has been really different.

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Speaker 2: So after the meeting where the vote got a substantial

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Speaker 2: minority of investors supporting it now went straight into going

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Speaker 2: out and consulting with investors, understanding what the expectations are

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Speaker 2: putting out more disclosures, and we're not all the way

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Speaker 2: there in terms of what we wanted to see. So

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Speaker 2: we've lodged a shareholder resolution again targeted on those romaining gaps.

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Speaker 2: But that's very different than the approach that Westpac took,

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Speaker 2: which is really in terms of those core asks for

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Speaker 2: more disclosure about the approach, we really haven't seen any progress.

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Speaker 2: In fact, if anything, this year's disclosure is less than

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Speaker 2: last year, despite there being a climate report that goes

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Speaker 2: for more than one hundred pages. What the bank tells

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Speaker 2: us is that they've been getting on and talking to

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Speaker 2: their customers and having those conversations, but we still don't

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Speaker 2: know that those conversations are covering.

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Speaker 3: These important issues.

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Speaker 2: And so we're really coming back and saying, please give

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Speaker 2: us that confidence now that this is really going to

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Speaker 2: do the job of meeting your commitments and.

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Speaker 3: Also moving the economy along that transition journey.

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Speaker 1: How important the banks to the energy transition? I know

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Speaker 1: they're not power of supplies, but wow, they finance the

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Speaker 1: power supplies and everyone else. How important are they.

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Speaker 2: Well, they finance everything. I'm big four banks. We talk

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Speaker 2: about institutional investors having economy or wide exposure, the banks

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Speaker 2: are even more so. They're in small businesses or private

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Speaker 2: businesses that large.

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Speaker 3: Institutions are not.

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Speaker 2: And the reality is we need those big banks to

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Speaker 2: do the job of financing climate transition. There is a

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Speaker 2: lot of capital that needs to be deployed in climate

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Speaker 2: solutions and it's the big banks that can do that.

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Speaker 2: Smaller banks just aren't at the scale to do that work.

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Speaker 2: So we need them to be financing renewables and other

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Speaker 2: low carbon things, but we also need them to be

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Speaker 2: turning off the tap on the things that don't have

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Speaker 2: a place in the low carbon future.

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Speaker 1: What about superannuation funds? And you don't necessarily need to

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Speaker 1: talk about competitors, but maybe I'm going to ask you

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Speaker 1: Australian ethically, you are a for purpose, you've explained what

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Speaker 1: it's about. But super funds, they're the other big fund

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Speaker 1: answers to industry. They have a role too, don't they Absolutely?

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Speaker 2: And there's a lot of investors making a lot of

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Speaker 2: commitments about how they're going to align their portfolios with

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Speaker 2: low carbon and that's one of the reasons why this

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Speaker 2: is a good topic for a shareholder proposal. So we,

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Speaker 2: like other big institutional investors, go and talk to companies

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Speaker 2: privately and we make all kinds of asks and encourage

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Speaker 2: them to do certain things. But what's different about a

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Speaker 2: shareholder proposal is that it puts it on the AGM agenda,

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Speaker 2: which means that all shareholders can vote on it. And

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Speaker 2: it really gives us a chance to amplify the call

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Speaker 2: that we're making and show the company that this is

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Speaker 2: a broad based ask from investors. And that is what

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Speaker 2: happened with NAB and Westpac last year. So despite proxy

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Speaker 2: advisors recommending against the proposal, despite the board recommending against it,

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Speaker 2: we saw more than twenty percent of shareholders supporting the

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Speaker 2: vote at Westpac and more than a quarter NAP. That's

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Speaker 2: a really substantial amount for this kind of phoat.

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Speaker 1: Taking a step back, Allison, I have wondered ever since

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Speaker 1: Donald Trump was elected what it means for investments. Well,

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Speaker 1: let's train ethical, but in ethical investing generally, I noticed

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Speaker 1: in the last week there was a fund that's an

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Speaker 1: anti woke fund. For example, they're targeting Starbucks in the

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Speaker 1: US saying hey, you've got inclusion as part of your hiring.

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Speaker 1: You know, we're not going to invest in you. There's

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Speaker 1: a real kickback. What does that mean for ethical investing?

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Speaker 2: They'll always be these kinds of new initiatives emerged from

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Speaker 2: time to time. We've been doing this for nearly forty years,

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Speaker 2: so ethical investing has a long track record. It's survived

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Speaker 2: a lot of presidencies, survived a lot of prime ministers,

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Speaker 2: a lot of economic cycles. So I'm not too worried

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Speaker 2: that ethical investing doesn't have a bright future. If anything,

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Speaker 2: I think what it means is that some of those

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Speaker 2: that were more jumping on the bandwagon and ethical investing

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Speaker 2: a couple of years ago might be taking a step back,

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Speaker 2: and that's probably a good thing because they probably weren't

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Speaker 2: really serious about it in the first place.

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Speaker 1: Alison, thanks for talking to Fear and Greed.

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Speaker 2: You're welcome, lovely to be here.

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Speaker 1: That was Allison George, head of Impact and Ethics at

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Speaker 1: Australian Ethical. This is a Fear and Greed business interview.

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Speaker 1: Join us every morning for the full episode of Fear

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Speaker 1: and Greed at Daily Business. Use for people who make

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Speaker 1: their own decisions. I'm Sean aelma Enjoy your day.