National Australia Bank Ltd. Group CEO Ross McEwan vowed not to abandon customers like the Port of Newcastle in New South Wales, for which his bank led the development of a sustainability-linked loan by a consortium of lenders.
The loan was part of a A$666 million refinancing facility for Newcastle, the world's largest coal export port, which handles 4,400 ship movements and 164 million tonnes of cargo per year of coal, steel, alumina, cement, bulk liquids, machinery, wheat and other grains, fertilizer and containers.
NAB said the arrangement includes A$515 million in sustainability-linked loans that offer a lower margin on debt if the port hits targets across a range of social and environmental metrics.
Environmental campaign group Market Forces tweeted May 5 that NAB's requirement for the port to reduce Scope 1 and 2 emissions only amounts to 2,333 tonnes of carbon dioxide equivalent. Further, the 158.4 Mt/y of coal exported from Newcastle would result in 396 Mt of carbon dioxide equivalent, the group said.
In response to these claims, an NAB spokesperson told S&P Global Market Intelligence that the aim of the Scope 1 and 2 emissions metric in the sustainability-linked loan is to incentivize the port to decarbonize its operations within a defined time frame, being in line with a "well-below 2 degrees [Celsius] scenario."
The port's monthly trade report for March showed coal contributed about 36.9 Mt of its year-to-date export total of just over 38 Mt.
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| The Port of Newcastle in New South Wales. |
The green portion of the loan is also designed to support diversification initiatives that address Scope 3 emissions, the NAB spokesperson added.
McEwan said in a May 6 statement to Market Intelligence that the bank "should not be abandoning customers when people put a lot of pressure on."
NAB has been part of the port's banking for a long time now, and like any other customer, the bank is working with them to "help them reduce their exposure to climate — and that's what our job should be," McEwan said. He added that NAB's exposure to the port has not increased.
"We are doing the right thing, as we will do with other companies, to support them to get to a better place," McEwan said.
Market Forces also said the Newcastle Port deal "makes an absolute mockery" of NAB's previous commitments, including a 2017 statement that it would no longer finance new thermal coal mining projects but increase lending to renewable energy projects.
In 2019, NAB updated that policy to cap thermal coal mining exposures at current levels and reduce thermal coal mining financing by 50% by 2028 to be "effectively zero" by 2035, apart from residual performance guarantees to rehabilitate existing coal assets.
The bank now expects its thermal coal mining exposure to reduce by 50% by 2026 from fiscal 2019 levels, and to be effectively zero by 2030.
NAB also said in 2019 that it would not take on new-to-bank thermal coal mining customers, and increased its environmental financing commitment to A$70 billion from A$55 billion by 2025.
Spare capacity
Port of Newcastle CEO Craig Carmody told Market Intelligence that while thermal coal dominates the port's exports, it is growing into a critical gateway for renewable energy technology, as evidenced in 2020 with shipments of wind turbines through the port.
"Both existing and emerging energy technology can access a competitive and efficient supply chain," he said.
The deepwater shipping channel is currently being operated at 50% of its capacity, and the port's "excellent connections" to national road and rail networks mean there is room to accommodate existing and new trade, Carmody said.
The port has set a goal to transition to electric vehicles and 100% renewable energy supply by the end of 2021, he said, and is "well on track" to meet that with 90.5% of its electricity supply now from renewables.
By the end of 2020, about 70% of the port’s vehicle fleet had switched to electric, he said.
"Subject to the availability of suitable utility replacement vehicles, we hope to soon switch the remainder of the fleet to electric," Carmody said.