Australia’s big four banks are using “loopholes” in their climate change commitments to continue funding billions of dollars in fossil fuel projects, a damning new report has revealed.

Analysis published on Tuesday by the Climate Council found the big banks have lent $57.5 billion to fossil fuel companies and projects since 2015, at the same time as many families struggle to afford insurance because climate change is worsening extreme weather events.

The report also reveals Australia’s 15 largest superannuation funds had invested more than $25 billion in coal, oil and gas expansion to the end of last year.

Dr Jennifer Rayner, head of advocacy at the Climate Council, said the likes of Commonwealth Bank, ANZ, Westpac and NAB aren’t being upfront with Australians about their climate change commitments.

“While they’re saying the right things about shifting investment into clean energy and industry, they’re still channelling a lot of money under the table to fossil fuel companies,” Rayner said.

Major banks climate loopholes

The Climate Council report says that while major banks have made commitments to ending their support for polluting projects, they have continued to support fossil fuel companies, a loophole that Rayner claims is allowing them to profit from the climate crisis.

“This demonstrates how much of a vicious and virtuous cycle our financial sector can be a part of,” Rayner said.

“At the moment climate change is a massive threat to a lot of households across the country, [and] banks themselves are also very exposed to that risk because they carry those home loans on their balance sheets.”

A key example includes a loan to Global Infrastructure Partners for its stake in the proposed Woodside Pluto 2 LNG project in Western Australia.

“The project would be excluded from NAB and Westpac’s lending policies if a loan had been provided directly to the project rather than through this investment vehicle,” the report said.

“Financing of fossil fuel corporations with expansion plans is also undertaken through bond arrangements, where the Big Four have arranged $2.2 billion worth of fossil fuel bonds in 2021-22.”

The report also takes aim at the way banks calculate their “financed emissions” by the portion of investment or lending extended to a project, because it could fail to properly account for pollution.

That’s particularly the case when big bank finance is required for a fossil fuel expansion to take place to begin with, because whatever share an individual bank takes won’t account for its entire carbon footprint over the life of the project.

Better risk reporting needed

Rayner said Australia needs to impose tougher restrictions on the banks that require them to be more transparent about their exposure to climate-related risks, and prevent existing loopholes.

The federal government is developing a new set of climate-related risk disclosure rules that would introduce a mandatory requirement for companies like banks to reduce exposure.

However, so-called “scope-three emissions” – which include bank-financed emissions – won’t be included in the mandatory reporting initially, opening the door for a loophole to remain in place.

The Climate Council report said scope-three emissions are “by far the largest share of a bank’s emission footprint”, noting that Australia has committed to including them under its international climate pledges.

It also pointed to the shortcomings with climate disclosures without mandatory action plans.

“The mandatory climate-related disclosures regime will allow us to see banks’ real exposure to climate risks for the first time, and how much they are intensifying these risks through their investment in fossil fuels,” it said.

“But this disclosure is where mandatory action will stop: There are no plans to require markets, regulators or governments to actually use these new insights to take action and reduce these risks.”