Westpac to invest over $8bn in sustainability

Published 20 February 2013 10:03, Updated 20 February 2013 10:12

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Westpac to invest over $8bn in sustainability

Westpac’s sustainability program will include making $6 billion available for lending and investment in the clean technology and environmental services sector. Photo: Glenn Hunt

Westpac plans to invest more than $8 billion in its new five-year sustainability strategy to tackle what the bank describes as “pressing issues” facing society and the environment.

The bank’s sustainability program will include earmarking $6 billion for lending and investments in the clean technology and environmental services sectors.

Around $2 billion will also be available to help people access affordable and social housing.

The bank intends to become carbon neutral for the life of the strategy, which dates to 2017.

Westpac head of sustainability Alison Ewings said the $8 billion set aside for the program related to the group’s target aspirations and “where we saw growth in those sectors”. “A lot of it will come from renewable, from solar and wind, and green building and water,” she said.

Ms Ewings said the bank’s housing strategy was “something we’ve been working on for a few years already”.

Westpac group executive Christine Parker said: “Our new strategic focus is to anticipate and shape the most pressing emerging issues where we have the skills and experience to make a meaningful difference.”

The group identified three areas of focus for the strategy: a changing financial landscape, anticipating the big shifts of demographic and cultural change, and providing economic solutions to environmental challenges.

“We want to respond in a way that benefits not only our business, but our customers and the wider community,” Ms Parker said. Westpac’s announcement comes as Fitch Ratings affirmed the long-term credit ratings of all four of Australia’s major banks as “stable” or “AA-”.

The ratings reflected the banks’ “dominant franchises” locally and in New Zealand, strong profitability, generally robust risk management, liquidity management and adequate capitalisation, the ratings house said on Tuesday.

“The agency also takes comfort from the banks’ straightforward and transparent business models, and the conservative and hands-on approach of the Australian prudential regulator,” it said.

The trade-off to these ticks of approval are the banks’ structural reliance on wholesale funding, including from offshore markets, and high household debt in Australia.

The agency noted, however, that Australian banks had improved their funding profiles since the global financial crisis, with players expanding their retail deposit books.

“Fitch expects the banks to focus on improving funding stability,” the ratings house said.

This would include boosting their retail deposit bases, among other strategies.

Revenue growth among the major players was tipped to come under pressure this year thanks to modest credit growth and “continued elevated funding costs” as competition to woo retail deposits remained heated.

“The agency expects a mild deterioration in the operating environment in Australia, which may place some modest pressure on asset quality and result in impairment charges,” it said.

However, the banks’ capital positions were adequate for their business mix and risks.

This story first appeared on The Australian Financial Review.

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