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Building capability.
Customer engagement.
Biodiversity.
Partnerships and initiatives.
Reducing our environmental footprint.
Risk Management.
Metrics and Targets.
Appendix.
Assurance opinion.
ANZ 2023 Climate-related Financial Disclosures 32
Retail Solar Power Purchase Agreement (PPA) Program.
In 2023, we developed a program to install solar to selected leased retail branches. ANZ executed PPAs with Upstream Energy, which installed and will maintain the solar arrays with no direct up-front cost to ANZ or our landlords.
ANZ purchased the renewable electricity from the solar array for the term of the lease, while landlords execute a 10-year roof licence agreement, after which time the solar array ownership is transferred to the landlord.
The key benefits were: • Increased onsite renewable energy into the network; • Progress on our renewable energy commitment; • No direct upfront cost of solar installations; • Improved short-term cash flow; • Fixed inflation protected electricity costs (under the PPA) for the term of the lease; and • No ongoing operatio...
The trial concluded in July, resulting in 11 landlords signing up to the program, and 247KW of solar power installed on our selected retail branches. The recommendation is to expand the program across other suitable sites within our Australian retail branch network in future years.
ReturnR reusable container program.
Aligned with our waste to landfill reduction target and following the announcement of a ban on single-use plastics in Victoria, we developed a Reusable Container Program in partnership with ReturnR at our head office in Docklands, Australia in June 2022.
We engaged with our retailers, cleaners, facility managers and staff to provide reusable products (coffee cups and food containers) for staff at the point of sale. We set up a central retailer storage hub for retailers to collect the products each morning and educated staff on how the program worked. Engagement of our ...
Since the program began in June 2022, we have seen a 41%1 reduction in single use coffee cups used by staff.
Climate Resilient Retail Branch Concept.
Our Lismore branch has been significantly impacted by floods in recent years, requiring two refurbishments. Partnering with JLL and Lendlease, we developed a strategy to improve the resilience of the branch to flooding by increasing the use of waterresistant materials.
Innovations developed include: • The use of flood damage resistant materials such as marine ply joinery and modular panels, epoxy flooring, powder coated metal planter boxes, painted masonry, and raised steel grille doors.
• Reduced usage of flood-vulnerable materials such as carpet and plasterboard.
• Electrical Services, including switchboards and IT servers, positioned above 2 metres to minimise electrical works required following a flood.
• Revised furniture selection to utilise powder coated steel and solid timber.
Case studies 1. Calculation based on average single use coffee cup recycled through the Simply Cups program vs average FTE in ANZ Centre between 1 July 2022 and 30 June 2023.
Overview.
Governance.
Strategy.
Our purpose and strategy.
Our climate ambition.
Supporting our customers to transition.
Financing sustainability $100b target performance.
Building capability.
Customer engagement.
Biodiversity.
Partnerships and initiatives.
Reducing our environmental footprint.
Risk Management.
Metrics and Targets.
Appendix.
Assurance opinion.
ANZ 2023 Climate-related Financial Disclosures 33
RISK MANAGEMENT.
How is ANZ exposed to climate-related risk?
The Group’s most material climate-related risks arise from lending to business and retail customers, which contributes to credit risk. Customers may be affected directly by physical and transition climate-related risks such as: the effect of extreme weather events on a customer’s business or property, including impacts...
Climate-related risks may also indirectly affect a customer through impacts to its supply chain and customer base.
If realised, these risks may affect the ability of customers to repay debt; result in an increased probability of default; result in ‘stranded assets’ and impact the amount the Group is able to recover due to the value or liquidity of collateral held as security being impaired. The Group may also face legal proceedings...
Refer to pages 44-45 for our credit metrics and climate exposed sub-industry sector exposures at default and page 80 for our portfolio financed emissions pathways and targets.1.
Climate-related transition and physical risks that may potentially impact our performance include:
Transition Risk Physical Risks.
Policy Risk Acute (eg. customer exposure to heatwaves, floods, bushfires and cyclones)
Chronic (eg. customer exposure to rising sea levels, rising average temperatures and ocean acidification)
Maket Risk.
Legal Risk.
Technology Risk.
Reputational Risk.
Policy risk.
Policy uncertainty or future government policy changes may affect the operating costs of customers in a range of sectors, particularly those in higheremitting sectors. For example, through more aggressive emissions reductions targets, a mandated shift to lower carbon processes or policies to allocate or levy costs asso...
A potential risk also exists, for example, should prudential regulators implement measures such as capital overlays on exposures to higher-emitting sectors in recognition of their increased transition risk. Such developments may increase the cost of funding which could in turn reduce our ability to provide finance to c...
Timeframe:2 S M L.
Legal risk.
Increased regulation will require financial institutions to dedicate additional and ongoing resources to identify, assess, manage and disclose climate risks and opportunities, leading to increased operational costs.
‘Greenwashing’ is the practice of misrepresenting the extent to which an entity, product or strategy is environmentally friendly, sustainable or ethical. For example, greenwashing risk may arise where an entity is alleged to have misrepresented its climate-related risks, business credentials or strategies. If ANZ is fo...
We also monitor our Institutional and Corporate customers’ exposure to legal risk, which may manifest as potential credit and reputational risks to ANZ, through our Social & Environmental Risk Screening process and credit process, for Institutional and Corporate customers identified by ANZ to be subject to heightened c...
Timeframe: S M L 1. Set in alignment with our Net-Zero Banking Alliance commitment. 2. ANZ classifies risk timeframes/horizons (i.e. short, medium and long-term), aligning with our classification of limits. Short-term: 0 to 1 (years), Medium-term: 1 to 5 (years) and Long-term: 5 to 30 (years).
Our understanding of climate-related and nature-related risks, including biodiversity loss, continues to evolve and mature.
On 9 November 2023 our Board Risk Committee approved that ‘climate risk’ will be elevated to a Key Material Risk. This means going forward that we are further strengthening our enterprisewide approach to managing climate risk. We are working to embed this change and expect to disclose our progress in our 2024 reporting...
Long term L Medium M Short S.
Overview.
Governance.
Strategy.
Risk Management.
Climate-related risk.
Risk management framework.
Policies and processes.
Integrating climate risk.
Physical risk.
Metrics and Targets.
Appendix.
Assurance opinion.
ANZ 2023 Climate-related Financial Disclosures 34
Technology risk.
New technologies may disrupt the economics of certain products and services. For example, we are seeing emerging technologies being applied to renewable energy projects (both generation and storage), which may reduce demand for coal and gas fired electricity generation faster than expected and result in assets becoming...
This risk may result in credit losses to ANZ, which can occur when a customer becomes unable or unwilling to repay debt. We seek to minimise the risk of losses through customer selection, working actively with customers facing difficulties and managing our exposure to customers that we identify may be impacted by techn...
Timeframe: S M L.
Market risk.
The market risk category of transition risks arise from lending to companies with large exposures to higher-emitting assets. If these companies experience a decline in demand for their products or services, this may affect their ability to repay loans. The impact may also extend to companies who are exposed to higher-e...
Market demand, supply and prices for climate exposed sectors, such as energy generation, can be subject to a number of influences and may change unexpectedly.
We seek to manage this risk through a combination of engagement, with relevant customers, typically those in the Institutional customer portfolio and by assessing relevant publicly available information, recognising that the levels of risk exposure and potential impacts vary across industry sectors and individual busin...
Timeframe: S M L.
Reputational risk.
Failure or perceived failure to apply appropriate standards to our decisions and respond effectively to stakeholder concerns about our involvement in particular transactions can result in public criticism and activism, potentially damaging our brand and reputation.
We seek to manage this risk through our Social and Environmental Risk Policy, which sets out the principles and standards to be taken into account by our bankers when considering large business transactions.1 We also continue to apply an enhanced due diligence and decision-making process for relevant customers and tran...