Banks have an important role to play in supporting the transition to net zero emissions.
The Paris Agreement recognises that provision of finance is consistent with a pathway towards low greenhouse gas emissions and climate-resilient development is one of the actions needed to respond to climate change. We are committed to transitioning our lending portfolio in line with the goals of the Paris Agreement.
“Several of our customers have either set production targets to phase out internal combustion engines or have net-zero commitments in relation to the cars they produce.”
In 2021 ANZ joined the Net-Zero Banking Alliance (NZBA) – an initiative bringing together a global group of banks – to help guide our efforts in steering financial flows towards the adoption of technologies, strategies and initiatives which reduce greenhouse gas emissions.
We are progressively setting Paris-aligned pathways and targets for 2030 (or sooner) for certain sectors. One such sector is auto manufacturing.
According to the International Energy Agency, passenger cars (light duty vehicles) contribute approximately 8 per cent of global carbon dioxide (CO2) emissions, making the automotive sector one of the largest contributors to global emissions.
This sector will play a critical role in the path to net zero, with achievement of this target likely to be dependent on increased production of zero emissions vehicles through electrification and/or production of hydrogen fuel-cell vehicles.
In this series, we will take a deeper look at these sectors, the pathways and targets we have set for each and the potential challenges and opportunities along the way. This article should be read with our Financed Emissions Methodology available. It explains the methodologies used to establish our emissions baselines and sectoral pathways or metrics, as well as our approach in setting our sectoral targets and the scenarios against which we have benchmarked those targets. Our methodology also includes important information about forward-looking statements and the uncertainties, challenges and risks associated with climate-related information.
According to a recent bluenotes article by ANZ Senior Commodity Strategist Daniel Hynes, electric vehicle (EV) sales are booming. “The EV market looks likely to be about 14 million EVs sold in 2023, bringing the market share to 20 per cent. This compares with the global passenger car market which is expected to grow by only 4 per cent year-on-year in 2023,” he explains.
In 2023, ANZ set a 2030 target to reduce the emissions intensity of our auto manufacturing portfolio by 28 per cent (compared with a 2022 baseline). This includes ANZ customers that own or operate one or more auto manufacturing facility (excludes vehicles other than cars, such as trucks, buses and motorbikes). Also that we have at least $10m exposure at default (EAD) at the end of our financial reporting year (30 September).
The emissions included in the metric are the total expected lifetime tailpipe emissions from all relevant cars manufactured by ANZ customers included in the target during the year of assessment. Tailpipe emissions are a source of Scope 3 emissions for auto manufacturers. Emissions intensity is a commonly used metric and is expected to promote greater comparability across all auto manufacturers.
In 2023, the emissions intensity of our auto manufacturing portfolio reduced by 7 per cent to 128g CO₂-e/vkm (carbon dioxide emissions per vehicle kilometre), compared to our 2022 baseline. We expect this decline to continue, given the increasing consumer demand for zero emissions vehicles.
ANZ has also set a 2025 target to track our performance against a secondary metric - measuring the mix of systems (known as powertrain) such as internal combustion engines, hybrid and zero emissions vehicles (electric or hydrogen) for our customers’ new vehicle sales.
The hybrid and electric portion of the powertrain mix within ANZ’s target portfolio was 19 per cent in 2023, which is on-track to meet the 2025 target of 25 per cent.
We recognise there will be significant and growing opportunities to support customers in their efforts to reduce the Scope 3 emissions of newly produced vehicles. ANZ engages with auto manufacturing customers who are part of our Large Emitters Engagement Program, to support and encourage them to strengthen their low carbon transition plans.
Several of our customers have either set production targets to phase out internal combustion engines or have net-zero commitments in relation to the cars they produce. Customer discussions have indicated significant investment in research and development is underway to address supply chain issues including battery manufacturing and supply.
That being said, supply chain risks remain, especially in relation to the supply of materials used in batteries for electric vehicles.
Achieving our 2030 intermediate targets for the auto manufacturing sector will require continuing reductions in the carbon intensity of new vehicles. In particular, ongoing investment in the production of zero emissions vehicles is needed.
Each year, ANZ releases a range of reporting which seeks to help our investors, shareholders, customers, employees and communities better understand our approach to, and performance against, key ESG and climate-related initiatives.
Our 2023 Climate-related Financial Disclosures have been prepared in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations 2017. ANZ joined the Net-Zero BankingAlliance (NZBA) in 2021 and the information within the FY23 Climate-related Financial Disclosures sets out how we are taking action in line with this commitment.
The full suite of ANZ’s ESG and climate-related reporting, along with further detail about our approach to developing metrics, pathways and targets for our priority sectors, is available at anz.com/esgreport.
Kris Fumberger is Manager ESG Advisory at ANZ
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
13 Nov 2023
20 Jun 2023