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Lucas Dow: Hypocrisy of bank, insurance chiefs exposed at coalface

29 July 2021

Lucas Dow: Hypocrisy of bank, insurance chiefs exposed at coalface

Chief Executive Officer and Country Head of Adani Australia, Lucas Dow, wrote for The Australian on the federal Parliamentary Inquiry into the Prudential Regulation of Australia's Export Industries, criticising banks and insurers arguments justifying their withdraw from financing the resources sector and businesses that support it. Mr Dow highlights the risks to jobs, businesses and regional cities and towns that is caused by the decisions of banking and insurance executives.

This week banking and insurance executives dialled in to Canberra to explain why they think wiping out thousands of Australian jobs and our second-biggest export industry is a perfectly reasonable thing for them to do.

They used clever words to tell the vitally important Federal Parliamentary Inquiry into the Prudential Regulation of Australia’s Export industries that we should all indeed feel good about businesses closing, families losing their main source of income, house prices falling and shops shutting in regional cities and towns.

No matter how they spin it, the facts remain the same - Australian banks and insurers are withdrawing support from Australia’s second most valuable export, coal, in the name of trying to greenwash their ESG (environment, social and governance) performance. Unless something is done to reverse this trend it will cost Australian families, towns, state revenues in NSW and Queensland and the whole Australian economy dearly.

In their submissions to the inquiry, banks and insurers make flawed arguments to justify withdrawing finance from the resources sector and businesses that support it and either refusing to insure them or increasing premiums to the point they become unaffordable. Such as: it is a free market; they must act in their own best interests and in the interests of their shareholders; international financiers will step in to fill the gap created by their withdrawal; and banks and insurers have no choice in these matters but are being forced into these positions by external pressures on their businesses such as the expectations of their investors and customers and the markets upon which they depend.

However, all of these are untrue. In the case of banks, it is not a free market. They enjoy generous protections paid for by the Australian taxpayer such as the deposit guarantee scheme. It is not in the interests of their investors. The long-term viability of their business depends on the health of the Australian economy. Killing our energy export industries like coal and gas will damage our economy and balance of trade. International financiers will not step in as they typically require a local partner to work with before they will consider an investment as documented in other submissions to the inquiry.

Banks have chosen to interpret the need to decrease global carbon dioxide emissions over time as simply stopping Australia’s fossil fuel use and exports. This is an unsophisticated response that fails to consider the need to decrease global emissions while at the same time acknowledging the right of people in the developing world to live without poverty.

Our banks and insurance companies are run by intelligent and educated people. Therefore, it is disappointing they have adopted such a simplistic approach. A more sophisticated approach would consider carbon intensity of all industries and would support a realistic transition to reduce carbon intensity and would prioritise actions that have a measurable positive impact on overall global carbon emissions.

Why turn a blind eye to those out-of-season cherries sitting on supermarket shelves that are flown halfway round the world? Why ignore the fact that removing high-quality Australian coal from the market will only see it replaced by lower quality coals from other nations at the expense of Australian jobs?

Why also refuse to finance and insure the coal industry while at the same time partaking in the enormous economic benefits the industry creates for our nation? Why such an inconsistent and unsophisticated approach?

Why not eschew all money generated from the coal and gas industries? Refuse the mortgage repayments from coal industry employees, refuse to insure the four-wheel drives and rental properties, refuse the credit card fees, close the branches in Brisbane, Mackay, Moranbah and the Hunter Valley, say thanks but no thanks to insuring and financing Queensland and NSW government schools, hospitals and roads – all paid for by coal royalties?

Why then do the banking and insurance sector take such an unsophisticated approach? The clues can be seen on the websites of foreign-funded anti-fossil fuel activists like Market Forces and the Australasian Centre for Corporate Responsibility. Here the clever campaign machines of these anti-free market organisations show themselves. Their campaigns create maximum shame, discomfort and embarrassment for company executives and directors to force them to acquiesce to the activists’ desires – rule out coal and gas, refuse to insure coal, set the bar so high that small and medium sized businesses can’t meet it and are priced out of the market therefore increasing the overall cost base for Australian industries making them uncompetitive.

How do bank and insurance directors and executives react to these email, social media and shareholder activism campaigns? Unfortunately, not with the considered long-term view that we might expect from Australia’s corporate leaders.   

All too often they choose to capitulate to activist demands despite them having no overall environmental benefit and being detrimental in the long-term to the Australian economy and their investors, simply to avoid embarrassment and social shaming. They call it stakeholder engagement. That’s not what I would call it.

If banking and insurance executives are so keen to engage with their stakeholders they should come out to Clermont, Mackay, Moranbah or Singleton and do some engagement with the people whose livelihoods their decisions are endangering.

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