Bank Australia realising opportunities through climate actionWe Mean Business
Australia is the world’s second largest exporter of coal, and its southern state of Victoria relies on brown coal to fuel 92% of its electricity generation. You’d be forgiven then for thinking that its local community owned bank, Bank Australia – headquartered in Melbourne, Victoria – would be happy to tow the regional, fossil-fuel intensive line. But in fact, it was the first bank and only the second company in Australia (following Origin Energy) to make seven We Mean Business commitments. They include setting science based emissions reduction targets, putting a price on carbon and procuring 100% of electricity from renewable sources. Bank Australia is the only Australian member of the Global Alliance for Banking on Values. They even run their own private nature reserve.
Far from making themselves unpopular, Bank Australia is pursuing environmental and social goals as a means of growing its business. And it’s working. The bank’s assets grew by 10.8% to $3.577 billion in 2015, and attracted a record 10,130 new customers in the same year (up to circa 130,000).
Having started life as the CSIRO Co-operative Credit Society Limited in 1957 (it will celebrate its 60th anniversary next year), its founding purpose was to help those unable to access mainstream finance. Ever since it has held progressive, responsible banking at its core – and it is used to doing things a little differently.
Rowan Dowland, general manager for corporate development, has worked in the community-owned banking sector for over 20 years. While Bank Australia has always taken a socially responsible approach to banking, “it was around 2002-2003 that we took the view that sustainable development was the lens through which the business needed to grow”, he explains. “Issues around renewable energy and climate have been on our radar since then. We aligned the banks own operations to become environmentally responsible.”
During the same period, climate change efforts – and carbon pricing in particular – have had a troubled time in Australia. A domestic emissions trading scheme (ETS) introduced in 2012 was repealed by change of government just two years later. Given that putting a price on carbon is one of the commitments Bank Australia has made – did it carry a risk to the business?
“We have a number of customers living in communities that have historically relied on brown coal”, says Dowland. “We are absolutely cognisant of the issue. But if you do a cost-benefit analysis, there is significantly more benefit for the business to place a price on carbon than to not. One of the areas where we are growing most significantly is with numbers of customers joining the bank as a consequence of divesting their assets from the four major banks in Australia specifically because of our commitment around not investing in fossil fuels… We will attract rather than lose customers as a consequence of these commitments.”
In fact, the bank’s latest annual report includes a growth strategy that centres specifically around attracting ‘socially aware customers’. The bank’s target market has an estimated 7.1 million people representing 36.2% of the Australian population. “That’s around $469 billion in assets”. “We are [currently] a $4 billion business with 130,000 customers so it represents significant upsides for us. That was part of the repositioning for Bank Australia in August of last year [when the bank changed its name from bankmecu].
“Whilst our scale is smaller than the large banks, our financial performance matches or exceeds them. Last year we grew our loan book by 21%… We demonstrate as a small bank that you can grow strongly, be very profitable, and at the same time very responsible… our business model and whatever successes that we might have challenges other banks and other businesses to adopt similar practices.”
Making commitments to take bold action “provides us with legitimacy”, says Dowland. “Our customers have an expectation that while we think local, we also act global. We are a long way from the rest of the world, and we want to be seen as part of a global solution. The seven commitments under the We Mean Business umbrella helps to achieve that.