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Data and Analytics – to support integration of climate-related risk. |
ANZ is participating in regulatory scenario assessments and stress tests, analysing the impact of certain climate risks to specific portfolios within the bank. ANZ is also engaging with industry bodies, consultants and third-party vendors to better understand data that could be used to assess and understand ANZ’s and o... |
The quality and availability of climate and naturerelated data remains a challenge. This year ANZ developed an Environmental Sustainability (ES) data strategy to inform our approach to sourcing and integrating climate data in priority use cases. |
We expect that the data strategy will help us to: • develop a more coordinated, centralised approach to climate data that can be shared across divisions and jurisdictions in which we operate; • understand our current data requirements, gaps and inter-dependencies across priority use cases; • start to identify and build... |
A data forum has been established to identify and prioritise ES data use cases across the Group. See pages 81-84 for further detail regarding our 2023 ESG Target update. |
Informing our risk assessments. |
ANZ recognises that scenario analysis is a strategic tool that can help us to further identify, understand, assess, and manage potential climate-related risks, impacts and opportunities of physical and transition risk to the Group and our customers. Scenario analysis can also help us to understand sector and portfolio-... |
Our focus has been on participating in regulatory led scenario assessments and stress tests to build capability and to develop our understanding of the data requirements we need. |
In 2021-2022 ANZ participated in the APRA Climate Vulnerability Assessment (CVA),2 which assessed the potential impact of physical and transition risks to parts of our Australian mortgages, agriculture and business lending portfolios. The three key objectives of the CVA were to: • assess potential financial exposure to... |
Data was provided by APRA to support the completion of the CVA. The approach included physical and transition risk impacts arising from two climate scenarios and included both portfolio and counterparty assessments. |
The CVA used two future climate scenarios as the foundation for assessing potential physical and transition risk impacts, which were aligned to the internationally recognised scenarios developed by the Network for Greening the Financial System (NGFS): a Current Policies Scenario and Delayed Transition Scenario. The Cur... |
APRA published the results of the CVA in November 2022. The CVA Information Paper which reports the results in more detail states that climate-related lending “… would be impacted under the climate scenarios that were evaluated. However, in the absence of a severe deterioration in macroeconomic conditions, these losses... |
The CVA Information Paper notes that the results “indicate that the impacts would be different for each of the two climate scenarios. In addition, the results also varied by bank, by region and sector, and over time. The results provided by the banks for the counterparty assessments suggest that counterparty credit rat... |
Across 2022 and 2023, ANZ Bank New Zealand participated in the Reserve Bank of New Zealand’s first climate sensitivity analysis, identifying areas of vulnerability exposed to physical and transition climate risks, specifically for the residential and agriculture credit portfolios. |
This year, ANZ Bank New Zealand was also one of five banks that participated in the Reserve Bank of New Zealand’s 2023 Climate Stress Test. ANZ Bank New Zealand will seek to integrate learnings and insights from these programs into their risk management processes. |
We are participating in the 2023-2024 Hong Kong Climate Risk Stress Test developed by the regulator, Hong Kong Monetary Authority. Our focus in this stress test is on a short-term scenario, which features both climate-related shocks and a macroeconomic downturn. |
Given ANZ operates across 29 markets, we expect the number of stress test exercises we participate in will increase over time. ANZ considers that participation in these stress tests will help to inform an approach to scenario analysis that can be applied by the Group and adjusted at a country-level. |
ANZ is also prioritising scenario analysis within our ES data strategy. |
1. Institutional, including Corporate customers. 2. The CVA was carried out by Australia's five largest banks. 3. APRA – Information Paper – Climate Vulnerability Assessment Results, November 2022, page 8. 4. APRA – Information Paper – Climate Vulnerability Assessment Results, November 2022, page 8. 5. APRA – Informati... |
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 41 |
Initial steps we are taking to consider physical risk to residential and agricultural sectors. |
Residential home loans – Australia. |
During this financial year, some customers in Australia were affected by floods and severe storms. While homes were unfortunately lost, most customers were protected by an insurance policy (in accordance with their home loan contract) which limited losses to the Group. As at 30 September 2023, these events had not resu... |
ANZ is engaging with external vendors to continue to explore climate-related physical risk data, tools and solutions to help identify, assess and manage potential physical risks to the residential home loans portfolio and to develop geospatial assessment capability. |
Residential home loans – New Zealand. |
Climate can be expected to have varying levels of impact on our customers’ properties and financial resilience. This year ANZ Bank New Zealand assessed the risk to New Zealand residential properties secured with an ANZ home loan from two different types of flooding – coastal and inland. |
The ANZ Bank New Zealand assessment used third-party data from New Zealand’s National Institute of Water and Atmospheric Research and Moody’s RMS1 to understand the potential risk across different climate scenarios and flooding severities. |
Having completed this analysis in 2023, ANZ Bank New Zealand is now seeking to better understand where financial vulnerabilities may exist, and how it can respond to these risks and support customers. |
Results from this assessment will be reported by ANZ Bank New Zealand in its 2023 climate-related disclosure. |
Agricultural sector – Australia. |
Agriculture is an important part of our business. |
We expect some customers have faced and will continue to face challenges attributable to the impacts of climate change. For example during extended drought, farmers may have a reduced ability to repay their loans due to disruptions to business and economic activity and/or impacts on income and asset values and thus rep... |
Climate variability assessments are part of agriculture credit writing procedures for new customers, existing customers buying additional property, and any customer in a region identified by ANZ as affected by drought. We work with our Agriculture customers to seek to limit the occurrence of financial stress caused by ... |
how climate change may affect the suitability and volatility of farming in given regions. This process helps inform ANZ’s strategic decision making, as well as credit risk appetite. |
Customers identified by ANZ as potentially being less resilient to climate change may be subject to enhanced underwriting standards – for example, loan approval may be dependent on a lower loan to valuation ratio, higher repayments or evidence of savings. |
We recognise the need to understand how customers manage their land and natural environment, including our customers’ plans for a changing climate. |
Refer to the Metrics and Targets section of the report at page 75 where we have this year set a data coverage target for our Large Institutional Agribusiness Customers to encourage and support the provision of high quality and comparable emissions data across the sector. |
Physical risk to ANZ’s operations. |
ANZ operates across Australia, New Zealand, Asia Pacific, Europe and America. Countries in these regions are vulnerable to extreme weather events, such as those that occurred in 2022-23 resulting in flooding along the eastern seaboard of Australia and Cyclone Gabrielle in New Zealand. While on occasion these events can... |
Physical risks associated with climate change, such as damage to ANZ’s physical assets or business disruption due to the occurrence of natural disasters, are identified, assessed, and managed through ongoing application of our Operational Risk Management Framework. |
This year, ANZ conducted a climate risk assessment, with a primary focus on evaluating the climate physical risks associated with our Group-wide property network. Our goal was to gain a deeper understanding of the potential risks and challenges posed by the physical impacts of climate change on our data centres, retail... |
To guide our assessment, we used climate projections from the latest Intergovernmental Panel on Climate Change (IPCC) assessment report. These projections helped us to identify how climate variables are changing and the potential impact on our business operations by the years 2030 and 2050. |
Having gained valuable insights, such as a better understanding of the potential physical climate risks and impacts to our property portfolio, we have commenced a process to evaluate the effectiveness of the existing controls for how we manage physical climate risks within our network. |
By undertaking this initiative, our objective is to safeguard the ongoing resilience of our property network into the future. |
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 42 |
METRICS AND TARGETS. |
ANZ’s Sectoral Metrics and Targets1. |
Sectors 2030 Interim Target Reduction Status Page. |
Energy 1. Power generation 50% (2020 baseline) ON TRACK 51 2. Oil and gas 26% (2020 baseline) ON TRACK 53 3. Thermal coal (new) 100% (2020 baseline) 55. |
Transport (new) 4a. Auto manufacturing 28% (2022 baseline) 57 4b. Aviation 30% (2019 baseline) 59 4c. Shipping 10% (2022 baseline) 61. |
Manufacturing 5. Aluminium 30% (2021 baseline) NOT ON TRACK 63 6. Cement 20% (2021 baseline) ON TRACK 65 7. Steel 28% (2021 baseline) CLOSE TO ON TRACK 67. |
Buildings 8a. Large-scale commercial real estate2 60% (2019 baseline) ON TRACK 69 8b. Residential home loans (new) N/A: BASELINE 71. |
Other 9. Large Institutional Agribusiness Customers (new) 100% of LIAC customers N/A: NEWLY INCLUDED 75. |
Total portfolio (new) N/A: COMPLEMENTARY METRIC 76. |
We are committed to transition all operational and financed carbon emissions from our lending portfolio to net zero by 2050. |
For ESG targets, including operational footprint, see page 81-84. |
1. See sectoral pathways (pages 49 to 77) and page 80 for further information. 2. Actual Performance Against our Large-scale commercial real estate Target up to end 2022. |
>10% above pathway <=10% above pathway. |
On or below pathway. |
ON TRACK. |
ON TRACK. |
ON TRACK. |
ON TRACK. |
Overview. |
Governance. |
Strategy. |
Risk Management. |
Metrics and Targets. |
Sectoral metrics and targets. |
Sector exposures. |
Our approach to sectoral pathways. |
Pathways performance dashboard. |
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