Australia’s largest lender, the Commonwealth Bank (CBA), has made a significant announcement regarding its stance on fossil fuel financing. The bank revealed that it will cease funding fossil fuel companies that do not align with the climate goals outlined in the Paris Agreement by the end of 2024. This decision sets CBA apart from its competitors, who have not yet taken similar steps in stopping support for coal, oil, and gas businesses.
CBA’s move comes after being criticized for its previous lending practices to fossil fuel companies. Market Forces, a climate lobby group, dubbed CBA as the “worst offender on climate and lending to fossil fuel companies” before lauding the bank as “the first of Australia’s major banks to announce its break up with climate-wrecking clients.”
The bank has laid out “core criteria” for its clients, including the requirement of a medium-term emissions reduction plan for 2035 and a net-zero ambition covering at least 95% of carbon pollution from processing and extraction. This decision is driven by concerns over the increasing frequency and impact of extreme weather events, which are affecting property values and insurance affordability. CBA highlighted that insurance premiums rose by 28% in the year to 31 March, with 12% of households experiencing extreme home insurance affordability stress.
While CBA’s exposure to the gas, coal, and oil industries is relatively low compared to its counterparts, the bank’s decision to halt financing for non-compliant fossil fuel companies sends a strong message to the industry. Market Forces commended CBA’s action and called on other major banks to follow suit in aligning their lending practices with global climate goals.
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