Carbon Disclosure Project CDP 2013 Investor CDP 2013 Information Request Westpac Banking Corporation Module: Introduction Page: Introduction 0.1 Introduction Please give a general description and introduction to your organization The Westpac Group (“Westpac”) is a financial services company with operations in Australia, New Zealand (NZ), the United Kingdom (UK) and the near Pacific region and maintains offices in other key financial centres around the world. Westpac is ranked in the top 5 listed companies by market capitalisation on the Australian Securities Exchange. As at 30 September 2012, our market capitalisation was A$76.5 billion and the Group employed approximately 36,000 people (full time equivalent basis). The Westpac Group has three key customer facing divisions serving around 12 million customers: Australian Financial Services (AFS), Westpac Institutional Bank (WIB) and New Zealand Banking (WNZL). AFS encompasses our retail and business banking operations in Australia and includes the business units (BUs) of Westpac Retail & Business Banking, St.George Banking Group and BT Financial Group as well as Banking Products and Risk Management. WIB delivers a broad range of financial services to commercial, corporate, institutional and government customers with connections to Australia and New Zealand as well as banking services throughout the near Pacific; and WNZL is responsible for sales and service of banking, wealth, and insurance products for consumer, business and institutional customers in New Zealand. Westpac's vision is 'to be one of the world's great companies helping our customers, communities and people to prosper and grow'. Achieving this requires us to manage our direct and indirect environmental impacts, including dealing with the critical issue of climate change. Climate change will have significant economic, social and environmental impacts in the regions in which we operate. This means that our investment, lending and operational decisions must take these impacts into account, but we also expect to drive shareholder value through our response. We were amongst the first Australian companies to take action on climate change: publicly reporting our emissions since 1996; responding to the CDP each year since it began; and we have a strong history of calling for early action on climate change from government and the broader business community. In 2008, we launched a five-year climate change strategy building on our existing activities, together with our position statement 'Transitioning to a low carbon economy'. This sets out our perspective on the science, economics and social impacts of climate change, impacts for our business, the role of the finance sector and includes a 2009-2013 Action Plan. It confirms our commitment to taking a precautionary approach to managing climate change and to embedding a whole of value chain approach to addressing climate change impacts across our operations. It was developed following extensive internal and external stakeholder consultation and approved by the Group Executive and Westpac Board. These principles are re-iterated in various commercial, marketing and capabilities documents. Following an extensive Board-led review over 2011-12, the Group has agreed an explicit sustainability focus on longer term issues and mega-trends as core strategy. Our aim is to have a positive societal impact on the trajectory of these issues whilst pursuing the future growth opportunities they represent. Climate change and other environmental challenges form one of three priority issues for action in the concrete plan - the Group’s 2013-17 sustainability strategy - launched in February 2013. In addition to the new longer-term focus and new objectives, the governance of our direct footprint has been enhanced with the formation of a Group-wide Environment Management Committee (EMC) in November 2012 is overseeing performance improvements across a broadened environmental
Introduction Please give a general description and introduction to your organization The Westpac Group (“Westpac”) is a financial services company with operations in Australia, New Zealand (NZ), the United Kingdom (UK) and the near Pacific region and maintains offices in other key financial centres around the world. Westpac is ranked in the top 5 listed companies by market capitalisation on the Australian Securities Exchange. As at 30 September 2012, our market capitalisation was A$76.5 billion and the Group employed approximately 36,000 people (full time equivalent basis). The Westpac Group has three key customer facing divisions serving around 12 million customers: Australian Financial Services (AFS), Westpac Institutional Bank (WIB) and New Zealand Banking (WNZL). AFS encompasses our retail and business banking operations in Australia and includes the business units (BUs) of Westpac Retail & Business Banking, St.George Banking Group and BT Financial Group as well as Banking Products and Risk Management. WIB delivers a broad range of financial services to commercial, corporate, institutional and government customers with connections to Australia and New Zealand as well as banking services throughout the near Pacific; and WNZL is responsible for sales and service of banking, wealth, and insurance products for consumer, business and institutional customers in New Zealand. Westpac's vision is 'to be one of the world's great companies helping our customers, communities and people to prosper and grow'. Achieving this requires us to manage our direct and indirect environmental impacts, including dealing with the critical issue of climate change. Climate change will have significant economic, social and environmental impacts in the regions in which we operate. This means that our investment, lending and operational decisions must take these impacts into account, but we also expect to drive shareholder value through our response. We were amongst the first Australian companies to take action on climate change: publicly reporting our emissions since 1996; responding to the CDP each year since it began; and we have a strong history of calling for early action on climate change from government and the broader business community. In 2008, we launched a five-year climate change strategy building on our existing activities, together with our position statement 'Transitioning to a low carbon economy'. This sets out our perspective on the science, economics and social impacts of climate change, impacts for our business, the role of the finance sector and includes a 2009-2013 Action Plan. It confirms our commitment to taking a precautionary approach to managing climate change and to embedding a whole of value chain approach to addressing climate change impacts across our operations. It was developed following extensive internal and external stakeholder consultation and approved by the Group Executive and Westpac Board. These principles are re-iterated in various commercial, marketing and capabilities documents. Following an extensive Board-led review over 2011-12, the Group has agreed an explicit sustainability focus on longer term issues and mega-trends as core strategy. Our aim is to have a positive societal impact on the trajectory of these issues whilst pursuing the future growth opportunities they represent. Climate change and other environmental challenges form one of three priority issues for action in the concrete plan - the Group’s 2013-17 sustainability strategy - launched in February 2013. In addition to the new longer-term focus and new objectives, the governance of our direct footprint has been enhanced with the formation of a Group-wide Environment Management Committee (EMC) in November 2012 is overseeing performance improvements across a broadened environmental
dashboard and the transition to carbon neutrality. Overall we continue to drive awareness and action in the community and amongst business and policymakers to help in the transition to a low carbon economy. Ultimately all parts of the economy will need to collaborate to effectively address climate change. For further information on the Group see "http://www.westpac.com.au/about-westpac/"
0.2
Reporting Year Please state the start and end date of the year for which you are reporting data. The current reporting year is the latest/most recent 12-month period for which data is reported. Enter the dates of this year first. We request data for more than one reporting period for some emission accounting questions. Please provide data for the three years prior to the current reporting year if you have not provided this information before, or if this is the first time you have answered a CDP information request. (This does not apply if you have been offered and selected the option of answering the shorter questionnaire). If you are going to provide additional years of data, please give the dates of those reporting periods here. Work backwards from the most recent reporting year. Please enter dates in following format: day(DD)/month(MM)/year(YYYY) (i.e. 31/01/2001).
Enter Periods that will be disclosed
Fri 01 Jul 2011 - Sat 30 Jun 2012
0.3
Country list configuration Please select the countries for which you will be supplying data. This selection will be carried forward to assist you in completing your response
Select country
Australia New Zealand United Kingdom Rest of world
0.4
Currency selection Please select the currency in which you would like to submit your response. All financial information contained in the response should be in this currency. AUD ($)
0.6
Modules As part of the request for information on behalf of investors, electric utilities, companies with electric utility activities or assets, companies in the automobile or auto component manufacture sectors, companies in the oil and gas industry and companies in the information technology and telecommunications sectors should complete supplementary questions in addition to the main questionnaire. If you are in these sectors (according to the Global Industry Classification Standard (GICS)), the corresponding sector modules will not appear below but will automatically appear in the navigation bar when you save this page. If you want to query your classification, please email [email protected]. If you have not been presented with a sector module that you consider would be appropriate for your company to answer, please select the module below. If you wish to view the questions first, please see https://www.cdproject.net/en-US/Programmes/Pages/More-questionnaires.aspx.
Module: Management [Investor]
Page: 1. Governance
1.1
Where is the highest level of direct responsibility for climate change within your company? Individual/Sub-set of the Board or other committee appointed by the Board
1.1a
Please identify the position of the individual or name of the committee with this responsibility In March 2012 the Board re-assumed the responsibility for sustainability, including climate change, and dissolved the Board Sustainability Committee in order to have full oversight and monitoring along with other committees as appropriate.
The role of the Board is to provide strategic guidance for Westpac and its related bodies corporate (Westpac Group) and effective oversight of management. The Board is accountable to security holders for the performance of the Westpac Group’s businesses. In performing its role, the Board aspires to excellence in governance standards. (see attached Board Charter)
1.2
Do you provide incentives for the management of climate change issues, including the attainment of targets? Yes
1.2a
Please complete the table
Who is entitled to benefit from these incentives?
The type of incentives
Incentivized performance indicator
Board/Executive board Monetary reward
In March 2012 the full Board re-assumed the responsibility for sustainability, including climate change, and dissolved the Board Sustainability Committee in order to have full oversight and monitoring along with other committees as appropriate. However, before the Board re-assumed responsibility for the oversight and monitoring of Westpac’s sustainability agenda, including the management of climate change issues, the Sustainability Committee Chairman Fees were $30,000, and Membership Fees were $15,000.
Management group Recognition (non-monetary)
The Sustainability Council with delegated authority from the Executive Team has a decision-making role on top of providing practical coordination and sharing best practice with regards to the management of climate change issues. As a member of the sustainability council, General Managers also have the opportunity to raise their profile at internal events and in the external media.
Business unit managers Monetary reward
A number of General Managers and BU Heads have bonuses tied to achieving components our sustainability strategy, including the objective to reduce our environmental footprint through, amongst other targets, making our operations carbon neutral over the life of the strategy 2013 to 2017, as well as objectives relating to increased financing to the CleanTech and environmental services sector, and the development of products to help customers manage their environmental impacts.
Energy managers Monetary reward
In 2012, Westpac announced new environmental targets that provide a more detailed view of our performance, including maintaining current levels of kWh of electricity/m2 for commercial and retail sites for 2013 as well as reporting the specific data centre measure, Power Usage Effectiveness, for the first time. Energy managers across the Group have bonuses tied to the achievement of these targets.
Who is entitled to benefit from these incentives?
The type of incentives
Incentivized performance indicator
Environment/Sustainability managers
Monetary reward
Delivery of climate strategy can account for up to 50% of at risk remuneration for Sustainability managers. Delivery against the commercial carbon strategy accounts for up to 100% of remuneration for emissions and environment roles within WIB.
All employees Monetary reward
Sustainability is included as a category in the balanced scorecard of all employee's and performance against their scorecard determines an employees bonus. For many employees this category is with regards to climate change activities e.g. promoting, developing or implementing emission reduction initiatives.
All employees Other non-monetary reward
The CEO Community & Environment Awards recognise both an individual employee & a team who have demonstrated outstanding support for their community and/or the environment The winners of the Awards are people who have gone beyond what is expected to make a difference to their local community and/or environment. Both the individual and team Award winners will receive a donation of $10,000 for their chosen community organisation or environmental cause.
Other: Selected Managers Monetary reward
A number of managers within WIB have performance objectives that include building customer awareness of our climate change capabilities and successfully executing carbon and carbon related finance and investment opportunities. This is also includes the effective application of environmental risk.
Public affairs managers Monetary reward
Climate change advocacy and perception scores form 25-50% of objectives linked to at risk remuneration for public affairs managers, as does internal engagement in sustainability issues, including climate change.
Please select the option that best describes your risk management procedures with regard to climate change risks and opportunities Integrated into multi-disciplinary company wide risk management processes
2.1a
Please provide further details Climate change risks & opportunities are identified & prioritised via traditional risk management mechanisms as well as specialised processes. Climate change has been considered in these processes for over 10 yrs. The scope of these process are addressed below & cover strategy development, operational risk, credit risk, business continuity planning (BCP), reputational risk, regulatory risk, a stakeholder engagement framework & strategic partnerships. Strategy development In December 2011 the Board Sustainability Committee (BSC) endorsed a sustainability strategy to anticipate & respond to the most pressing emerging societal issues where the bank has the skills & experience to make a meaningful, positive impact. In March 2012 the full Board re-assumed responsibility for sustainability & dissolved the BSC in order to have full oversight & monitoring along with the relevant sub-committees, as appropriate. For instance ESG Risk policy is approved by the Board Risk Management Committee (BRMC). The Executive Team (ET) continues to have explicit responsibility for sustainability performance & the Sustainability Council (SC) with delegated authority from the ET was reformulated at General Manager level in February 2011 to enhance the ET's decision-making role. The Group-wide strategy & objectives are agreed at ET & Board level & reflected in the annual Business Strategy Review (BSR) process, supported by quarterly internal reporting to the SC and half-yearly reporting to the ET & Board. The Board has responsibility for oversight of sustainability policies & practices (in addition to new or continuing issues requiring attention). Operational risk BCP takes an all hazards approach, incl. planning for natural disasters to ensure customer, regulatory, financial & reputational issues are best managed. The BCP is reviewed annually by operational risk, internal & external auditors. Risks are considered at the operational level with appropriate plans put in place to cover key risks; systems ensure the continuation of essential operations, continuity of service for impacted customers & compulsory training for employees which include specific aspects in respect to natural disasters & other climate events. BCPs are aligned to our customers needs & also Australian Prudential Regulation Authority (APRA) regulatory requirements. The completeness of these plans are attested to by the Group to APRA annually. Environmental Social & Governance (ESG) Credit Risk Management Framework As the majority of our climate risks are indirect our ESG Risk Framework including credit, investment & supply chain risks is a key framework for managing our approach, where credit or the loan book can be regarded as the organisation's assets. The framework is endorsed by the Board Risk Management Committee (BRMC) & is formally reviewed at least every 2 years (last updated July 2012). Responsibility for the identification, management & reporting of ESG risks extends across the Group's business operations, credit & lending, supply chain & investment management. The Group & underlying divisional frameworks address ESG risks & opportunities at the country, sector, company & transaction levels. A framework for WNZL was established in 2013 to apply specifically to NZ. ESG credit risk policy This policy incorporates ESG risk into credit decision making at the transaction & sector level. Reviewed annually (last reviewed May 2013), it has been extended to provide guidance for addressing ESG risk in-country analysis. Detailed divisional ESG policies, sector policies & issue-specific position statements support the Group policy & clarify our approach to assessing the ESG dimensions of our financing & lending activities. For example, in WIB the relevant policy captures ESG, reputation & sensitive transaction risks, as applied to particular transactions & customer relationships. Under these policies, ESG credit risks are considered at every point of analysis including origination & annual review. This process is outlined in Westpac’s Approach to Sustainable Finance (http://www.westpac.com.au/about-westpac/sustainability-and-community/sustainability-action/responsible-banking-investment/assessing-sustainable-risks/ and attached). The position statements are developed & reviewed every 2 years by Group Risk in conjunction with WIB, AFS & Group Sustainability. A dedicated client engagement program supports this process undertaken with high risk clients across industry sectors as well as input from other key stakeholders, including NGOs, the scientific community & the general public. The commercial implications of climate risk are embedded, where appropriate, into both the AFS & WIB Credit Manuals. This is disaggregated between ESG, regulatory risk, market risk & physical risk implications. During the credit evaluation process these risks are assessed at the country, industry, sector, customer & transaction level. Country & industry sector reviews are undertaken annually and customer reviews are undertaken on a rolling 12-18 month basis, or sooner, as
required. Specific environmental & sector policies that encompass customer & transaction underwriting standards further support this process. This ensures that all ESG risks identified in the sector strategy review are assessed as part of the credit evaluation process. Additional high impact issues receive further analysis on an ongoing basis. Also embedded in AFS credit manual is the management of client’s direct carbon reporting requirements, with specific requirements included for managing, monitoring and reporting mandatory NGER provisions. To assist in the effectiveness of this process, additional training is provided for Credit Risk Officers, Analysts & Risk Managers on identifying & managing ESG risks, including carbon price impacts. An annual assessment of customer exposure to carbon price impacts has been undertaken for Australia annually since 2011, with results reported to WIB & the Group Executive Teams & the Board. Supply chain risk The supplier selection risk assessment process includes mandatory sustainability assessment for all contracts. It forms part of the tender process, an integral part of the contract & is regularly reviewed during the contract's life. If supplier's performance is inadequate, a Remedial Action Plan is required providing annual updates against items identified. This also includes having effective BCP in place. Reputation risk The BRMC & Operational Risk Compliance Committee (OPCO) both have oversight & ongoing review of the Reputation Risk Management Framework. Divisional OPCO's or Divisional Risk Committees monitor the Division's reputation risk profile, delivery against action plans & effectiveness of management, & escalate issues to Group OPCO as appropriate. Awareness of reputation risk is promoted throughout the Group as it is the responsibility of all employees to safeguard the reputation of the Group & to identify, measure, & manage reputation risks, including those related to climate change – this is particularly relevant in Australia where climate change remains a divisive issue. Regulatory risk Regulatory developments within our areas of operations & globally are monitored by Enterprise Compliance & Regulatory Affairs & logged in a Regulatory Change Register. Each item is assigned to BUs for action. For climate change this has included mandatory reporting legislation managed by Group Property, proposed carbon trading legislation managed by WIB, carbon farming managed by our agribusiness team & local council approaches to sea level risk managed by our credit risk areas. Stakeholder engagement framework & strategic partnerships Group Corporate Affairs & Sustainability coordinate strategic stakeholder & community relations activities to identify emerging ESG risks & maintain strategic partnerships with key organisations to ensure that the Group is responding appropriately. Material issues are identified, prioritised & defined with respect to their impact on our stakeholders & our business via an annual review process. These issues are reviewed externally & internally against AA1000APS (2008) before being assured by KPMG & reported in the Annual Review and Sustainability Report (see attached), Annual Report and online. The Group’s approach is designed to embed the consideration of climate change impacts w
2.2
Is climate change integrated into your business strategy? Yes
2.2a
Please describe the process and outcomes i) Explicit inclusion of sustainability leadership, including climate change, is necessary to deliver WBC’s vision “to be one of the world’s great companies, helping our customers, communities & people to prosper & grow”. This vision guides all strategy development across the business. Strategy development is led by Group Strategy and includes inputs from the Sustainability Council (SC), the annual AA1000APS (2008) sustainability materiality analysis, & Business Units (BU) inputs. E.g. Industry sector reviews incorporating ESG undertaken within WIB. The focus of WBC’s overall strategy to 2017 (finalised in August 2013) is to respond to longer term shifts & mega-trends in the operating environment. Climate change components are implemented within BU strategy. The 5 components approved by the Board are: - managing our footprint; - risk management & capacity building; - products & services to assist customers manage impacts; - employee engagement; & - communication & advocacy. In February 2013, WBC also launched its 2013-2017 Sustainability Strategy which identified 3 priority issues for action, based on an assessment of the strategic mega-trends over the next 30 years, including ‘Economic Solutions for Environmental Challenges’. This has 3 objectives: 1) Providing solutions that help customers adapt to environmental challenges 2) Lending & investment in CleanTech & environmental services 3) Reducing our environmental footprint, including targets for kWh of electricity/m2 for commercial & retail sites, & a specific data centre measure (Power Usage Effectiveness) for the first time. In recognition that our previous emissions reduction activities have meant that many of the opportunities for reductions have been implemented, we will also make our operations carbon neutral over this period. Strategy implementation progress is monitored & reported quarterly to the Group-wide Sustainability Council & six monthly to the Executive Team & the Board. Additional items reported to the Board throughout the year have included: market share in climate change related segments, progress in incorporating carbon into credit risk processes & product development, our advocacy position, responses to emerging regulation & stakeholder feedback. Operationally, the Environment Management Committee (EMC), meets every 6 weeks to monitor progress against objectives & review policy & procedural frameworks. The WIB Carbon Deal Team meets fortnightly & reviews carbon commercial opportunities, & the Renewable Energy Committee meets quarterly & oversees renewable energy investment. ii) Key areas of climate change influencing the strategy include: Emerging markets in CleanTech, environmental services & carbon trading in WIB; Physical risks to the agricultural sector in business banking; & The need to understand the overall carbon exposure & mitigation paths within our lending & investment activities. Overall, as outlined in our sustainability strategy, we recognise the need to engage with all client sectors to help customers manage their environmental challenges, including those related to climate change. iii) Key components of short-term strategy include: - new environmental targets that provide a more detailed view of our performance, - changes to risk appetite, risk management & underwriting practices to account for ongoing regulatory uncertainty & risks; - training for employees who assess risk or engage customers in high risk sectors; - proactive client engagement to understand risk mitigation activities & potential product & service needs; - stronger governance for WBC’s operational processes to deliver against mandatory reporting legislation & new objectives; - integrating carbon price impacts into procurement decisions & supplier screening;
- new retail finance products, including a commitment launch one provide or service each year to help our retail customers meet their environmental challenges. This already includes our SunPower flexi-loan to help fund the adoption of household solar & interest free loans for employees to fund energy & water saving activities in their own home; & - identification of emerging customer segments in a carbon constrained environment & resource allocations to support growth, including the February 2013 announcement that the Group will make available up AUD6B for lending & investment in CleanTech & environmental services by 2017. This investment in the short-term is to grow the sector & develop relationships in the longer term. iv)Key components of long-term strategy include: - stronger integration of adaptation factors in credit & investment policies, processes & decisions, including sector reviews & individual transactions; - new insurance & investment products for a range of emerging market segments; - engaging retail customers on minimising exposure to rising energy costs, identifying commercial opportunity & building greater resilience; & - more strategic & sophisticated responses to issues of resource scarcity & related challenges. v) Our February 2013 announcement to lend & invest up to AUD6bn in CleanTech & environmental services further cemented our reputation in this emerging & growing sector. Embedding our response to climate change within our business is delivering competitive advantage via: - Revenue growth in the CleanTech & environmental services sector; - Renewable energy investment growth. 51.7% of the total lending in the energy sector already goes to hydro & renewables, demonstrating our commitment to the sector; - Pursuing an organic growth strategy has provided greater resilience to the volatility of short-term political & market developments. This strategy has seen a range of credit & relationship managers develop expertise in carbon; - Strong market recognition due to effective public advocacy led by CEO & business; - The achievement of our 2008 objective to be a top 3 regional player in carbon related by 2013. E.g. Voted Best Trading Company in Australasia in the global Environmental Finance Awards 2010, 2011 & 2012 by customers, peers & competitors providing best service in carbon markets; - Trading EU ETS since 2006, first to trade NZ ETS & trading the Australian Carbon Price Mechanism, including international units eligible in all 3 jurisdictions. Linking Aust-EU carbon markets (2015) further extends our carbon market capabilities. vi) Fundamentally the most substantial business decision has been the decision to pursue a leadership position on carbon & climate change, this has included: - A clear public advocacy role; - Support for emerging carbon markets, playing a role as market maker; - The formation of a renewable energy strategy; & - A formal target on lending & investment to CleanTech & environmental services (up to AUD6bn by 2017).
2.2b
Please explain why not
2.3
Do you engage in activities that could either directly or indirectly influence policy on climate change through any of the following? (tick all that apply) Direct engagement Trade associations Funding research organizations Other
2.3a
On what issues have you been engaging directly?
Focus of legislation
Corporate Position Details of engagement Proposed solution
Cap and trade Support
We are engaged in ongoing consultation on various technical design aspects of the implementation of the Aus Carbon Price Mechanism under the Clean Energy Act & the ongoing refinement of the NZ ETS. In Australia these relate to the functioning of the market, such as process for Auctioning Carbon Units, determination of the reference price for fuels & Aust-EU market linking provisions. In New Zealand, we have engaged on proposed options for the carry over of Kyoto Units under the NZETS. We provided written submissions, participated in departmental roundtables and engaged directly with regulators and policy makers on draft proposals released for public consultation.
Our core position is set out in the Westpac Group Climate Change Position Statement. Our position on key elements of market design is endorsed at the Board level and informs all government engagement. WBC supports a market-based approach to pricing carbon as the least cost & most efficient means of pricing carbon. Westpac strongly supports linking to and alignment with international markets following the move to the floating price period (post 2015). This will lower the cost of compliance for liable entities and support the emergence of an international carbon price signal. In making recommendations, a number of considerations inform our position. Market design and implementation frameworks must support: - Investment certainty; - Market confidence; - Environmental outcomes; - Affordable and efficient greenhouse gas abatement across the economy; & - A clear understanding of ongoing liabilities. Auctions: Westpac supports the overarching policy objectives of the promoting allocative efficiency and transparent and efficient price discovery. Westpac’s feedback is primarily concerned with promoting procedural outcomes which support the timely and efficient completion of the ascending clock auction. Reference price: Westpac broadly supported the approach set out, with two concerns: using a six-month period (2 auctions) to set the reference price & the potential for disconnection from the price traded in the secondary market; and the proposal for obtaining prices for each of the international units referenced. Aust-EU linking: Westpac broadly supported the approach set out for consultation, to establish an interim indirect link between the Australian and EU registries, before moving to a direct two-way link. We supported the move to two-way international linking as soon as possible, to allow liable entities to manage their compliance obligations efficiently and minimize operational risk. NZ Kyoto carry-over: Westpac supported the proposal to not allow individual account holders to carry over
Focus of legislation
Corporate Position Details of engagement Proposed solution
any ERUs and CERs after the true up period; and the proposal to allow the automatic carry-over of all AAUs held in the New Zealand Emissions Unit Register (NZEUR) to minimise the administrative burden. We also requested additional clarity over a number of related matters on post-2015 market arrangements.
Clean energy generation
Neutral Engaged with the Aust Climate Change Authority on the Renewable Energy Target (RET) review.
Westpac participated in dialogue and engagement with the CCA regarding the investment and market implications of a number of matters under consideration as part of the review.
Adaptation resiliency Support
Westpac is a member of the Australian Business Roundtable for Disaster Resilience and Natural Disasters together with IAG, Optus, Munich Re, Investa and the Red Cross. The Roundtable has commissioned a white paper look at the cost benefits of investing resilience activities pre-disaster in order to reduce the economic and social impacts of major weather events.
The Roundtable is calling for a more coordinated approach and greater focus as well as national and local investment in resilience measures, before disasters occur. Full details of the white paper will be launched in late June and will be available at http://australianbusinessroundtable.com.au/
Other: Review of targets and caps
Undecided
Australia has just commenced a substantial review of national emissions reduction targets and CPM scheme caps. Westpac is in the early stages of engagement of this issue.
At the time of writing, WBC has not yet published a formal position on this issue. More broadly, Westpac believes that the setting of national targets is a role for Government, with due consideration to the science and economic implications. - Westpac supports the implementation of ‘long, loud and legal’ emission reduction targets to promote certainty for business investment. - Westpac supports a non-partisan approach to target setting wherever possible.
2.3b
Are you on the Board of any trade associations or provide funding beyond membership? Yes
2.3c
Please enter the details of those trade associations that are likely to take a position on climate change legislation
Trade association
Is your position on
climate change
consistent with theirs?
Please explain the trade association"s position How have you, or are you attempting to influence the postion?
Business Council of Australia Consistent
The BCA has a high level position in favour of a market based price on carbon, which is broadly consistent with Westpac’s view. WBC’s perspective is frequently more detailed and more focused on the technical operation of the carbon market in particular.
Westpac is a longstanding member, and participant on the Board of the BCA. WBC also maintains ongoing dialogue with policy directors within the BCA on key areas of carbon market policy development.
Australian Bankers’ Association
Consistent The ABA supports the application of a market based price on carbon, and the efficient and effective operation of carbon policies via financial instruments.
WBC is a member of the ABA Board, numerous policy and working group committees on aspects of carbon market design and renewable energy policy frameworks, and engages on an ongoing basis around key policy issues and impacts.
Australian Financial markets Association
Consistent
AFMA engages with regulatory and government authorities on a number of aspects of the technical design, implementation and operation of the Australian carbon market and related impacts.
WBC directs policy engagement on carbon related matters via our position as Chair of the Carbon Markets Committee and a member of the AFMA Electricity Committee.
New Zealand Financial Markets Association
Consistent
NZFMA engages with regulatory and government authorities on a number of aspects of the technical design, implementation and operation of the NZ carbon market and related impacts
WBC is Deputy Chair of the NZFMA Carbon Markets Committee.
2.3d
Do you publically disclose a list of all the research organizations that you fund? Yes
2.3e
Do you fund any research organizations to produce public work on climate change? Yes
2.3f
Please describe the work and how it aligns with your own strategy on climate change Westpac has a number of relationships with organisations undertaking climate change & related research including: Banking Environment Initiative (BEI) - this multibank initiative seeks to lead the banking industry in collectively directing capital towards environmental & socially sustainable eco-development. BEI has engaged with corporate clients in a clean energy collaboration to research & address the systemic blockages to clean energy investment, including existing valuation methodologies at the project & corporate level. This is consistent with Westpac’s climate strategy focus on risk, including risk settings. Climate Institute – we have been a lead partner of the Climate Institute’s Climate Partner’s Network since 2010 which aims to promote business leadership in driving climate change and better inform policy debate. This has most recently included research into preparedness by industry sector for a changing climate in the report ‘Coming Ready or not’. This aligns both to a number of objectives within our climate change strategy including advocacy but also risk management, by enhancing our own understanding of direct and indirect risks associated with climate change, in this case adaptation risk. Australian Business Roundtable for Disaster Resilience and Safer Communities – although the modelling in this research paper does not explicitly include the impacts of climate change and can therefore be considered conservative in its estimates, this white paper, undertaken by Deloitte Access Economics and commissioned by Westpac, IAG, Optus, Munich Re, Investa and Red Cross looks at the rising social and economic costs of natural disasters and calls for greater coordination and funding of activities before disasters occur. The results will be released in June and be available at http://australianbusinessroundtable.com.au/ This is again consistent with our broader advocacy strategy to raise awareness of the economic consequences of environmental issues & encourage action, in particular in relation to adaptation & resilience, & supports our broader engagement activities in communities impacted by natural disasters. ACF Australian Business Roundtable on Climate Change – Westpac was a member of the roundtable that released a paper outlining the ‘Business case for early action on climate change’. Key recommendations in the paper included: a legal framework to establish a carbon price signal; support for innovation and investment in emerging and breakthrough technologies; and, building national resilience to the impacts of climate change UNEPFI – Westpac is a founding signatory to UNEPFI & has actively engaged in its work on a range of environmental issues, most notably water – a key adaptation issue in our primary areas of operation. ACE CRC – Westpac has engaged ACE CRC to undertake employee information sessions on climate change adaptation issues in support of our broader internal capacity building goals.
2.3g
Please provide details of the other engagement activities that you undertake We have undertaken a comprehensive client engagement program to better understand the key risks and opportunities for our clients. This has followed on from a program of internal engagement including the training of over 1800 employees in climate risk and has been supported by the development of a client engagement toolkit. In addition in forming both our climate change strategy as well as underlying policies and targets we have engaged with a range of stakeholders including customers, NGOs and the scientific community.
Other engagement activities that we undertake include a Carbon Series events being managed & preseented by Davidson Institute designed to provide detail on what the carbon price is, and how it impacts the general operation of a small business. We also continue to engage with government and copies of our formal submissions can be found on our website at http://www.westpac.com.au/about-westpac/sustainability-and-community/environment/climate-change/communication-advocacy/
2.3h
What processes do you have in place to ensure that all of your direct and indirect activities that influence policy are consistent with your overall climate change strategy? Our climate change position has been formally endorsed by the Board and ET. All policy activities must be in line with this approved position and are reviewed by our Director Environment and Emissions as well as the Government and Industry Affairs team to ensure consistency. There are approved spokespeople on climate related issues, consistent with our approach to a range of banking issues. In addition there is a climate change toolkit available on our intranet site which outlines the position and reinforces processes for policy comments and submissions.
2.3i
Please explain why you do not engage with policy makers
Did you have an emissions reduction target that was active (ongoing or reached completion) in the reporting year? Absolute target
3.1a
Please provide details of your absolute target
ID
Scope
% of emissionsin
scope
% reduction from base
year
Base year
Base year emissions
(metric tonnes CO2e)
Target year
Comment
A1 Scope 1+2 97% 30% 2008 191521 2013
This target is a 30 June target and does not relate to renewable energy purchases. In 2008, we set ourselves an ambitious task to achieve a further 30% reduction in greenhouse gas emissions by 2013, across Australian and New Zealand building on our earlier 40% reduction. However, we recognized in 2012 that significant changes to our business, including the completion of a major merger and the approval of a new IT strategy combined with our previous emissions reduction activity (over 40% between 1996 and 2008) had meant that many of the opportunities for reductions have already been implemented and decided to make our operations carbon neutral over the life of the strategy, 2013 to 2017.
3.1b
Please provide details of your intensity target
ID
Scope
% of emissions in
scope
% reduction from base year
Metric
Base year
Normalized base year emissions
Target year
Comment
3.1c
Please also indicate what change in absolute emissions this intensity target reflects
ID
Direction of change anticipated in absolute Scope 1+2 emissions at
target completion?
% change anticipated in absolute Scope 1+2
emissions
Direction of change anticipated in absolute Scope 3 emissions at target
completion?
% change anticipated in absolute Scope 3
emissions
Comment
3.1d
Please provide details on your progress against this target made in the reporting year
ID
% complete
(time)
% complete (emissions)
Comment
D1 80% 23%
In 2008, we set ourselves an ambitious task to achieve a further 30% reduction in greenhouse gas emissions by 2013, across Australian and New Zealand building on our earlier 40% reduction. Whilst we rebased our emissions profile in 2009 following a merger with St.George, the complexity of the combined portfolio made the task more difficult. In addition, necessary technology upgrades approved in 2010 saw the emissions trajectory for our data centres increase by over 25% during the target period. During the 2012 reporting year we acknowledged that our previous emissions reduction activity had meant that many of the opportunities for reductions have already been implemented and decided to make our operations carbon neutral over the life of our new sustainability strategy, 2013 to 2017.
3.1e
Please explain (i) why not; and (ii) forecast how your emissions will change over the next five years
3.2
Does the use of your goods and/or services directly enable GHG emissions to be avoided by a third party? Yes
3.2a
Please provide details (see guidance) The use of WBC’s goods & services directly enables third parties to avoid GHG emissions by helping customers adapt to environmental challenges. Specific products that enable GHG emissions to be avoided by our customers include our stake in ArkX which facilitates wholesale and retail investment in renewables, our Energy Efficiency Lease (EEL) designed to help businesses fund energy reduction programs and our SunPower flexi-loan to help fund the adoption of household solar & interest free loans for employees to fund energy saving activities in their own home. A SunPower flexi-loan can enable customers to avoid emissions from electricity. E.g. A SunPower project in Augusta, Western Australia supplies approx 50% of each apartment’s electricity; saves each apartment owner AU$ 346 per year & saves 45 tonnes per year of CO2 across all 18 apartments. Emissions from paper consumption used to support our goods & services are also avoided by customers through the provision of eStatements. Since launching eStatements in 2005, approximately 1.5 million customers have opted in, reducing Westpac’s overall carbon footprint and helping save $9,101,673.96 and 482.08 tonnes of paper. Applying the emission factor for paper waste (2.5 tonnes CO2 per tonne of paper), issued by the Australian Federal Government, this has contributed to an emissions saving of approximately 1,205.20 tonnes. This emission factor does not include emissions associated with paper production nor does it take into account any printing or computer use by the end user, nor does it take into consideration data storage by Westpac as it assumed that this would need to occur anyway. Other initiatives across WBC include BT implementing continuous improvement strategies to reduce WBC’s environmental footprint through the increased use of online statements and reducing product disclosure statement sizes. For the year ending 31 March 2013 the holders of some 218,633 accounts opted to stop their paper statements via Online Banking, and more than 66,000 credit card statements have been stopped since we introduced credit card statement suppression on 14th July last year. Overall we have seen the number of mail deliveries made by New Zealand Post on WNZL's behalf reduce by approximately half between 2012 and 2013. In 2011 Westpac and Perenia (recently acquired by South Pole Carbon) established a partnership to develop joint ‘primary CER’ (pCER) deals, where Westpac agreed to offtake pCERs for sale into New Zealand and Australian compliance markets. WIB is a regular trader of CERs and ERUs in EU, NZ markets and the emerging Australian market. Westpac has also acquired offset credits via domestic project origination activities in Australian and NZ markets, for the purposes of generating ACCUs from the Carbon Farming Initiative and NZUs from forestry activities in the NZETS.
3.3
Did you have emissions reduction initiatives that were active within the reporting year (this can include those in the planning and implementation phases) Yes
3.3a
Please identify the total number of projects at each stage of development, and for those in the implementation stages, the estimated CO2e savings
Stage of development
Number of projects
Total estimated annual CO2e savings in metric tonnes CO2e (only for rows marked *)
Under investigation 446 7481 To be implemented* 61 3014 Implementation commenced* 25 4050 Implemented* 299 10550 Not to be implemented 323 26248
3.3b
For those initiatives implemented in the reporting year, please provide details in the table below
Activity type
Description of activity
Estimated annual CO2e
savings (metric tonnes CO2e)
Annual monetary savings
(unit currency -
as specified in Q0.4)
Investment required (unit currency - as specified in
Q0.4)
Payback period
Energy efficiency: Building services
Voluntary Energy Efficiency Retrofit Program (EERP). This program aimed to reduce Scope 2 emissions of 112 branches through lighting upgrades and the installation and/or rescheduling of timers on air conditioners, hot water units and lights. The program was rolled out over the reporting period.
1508 462180 1843344 1-3 years
Energy efficiency: Building services
Other voluntary energy efficiency initiatives (Scope 2 reductions) at retail sites (branches and business banking centres), generally conducted as part of repair and maintenance or upon request. Works included lighting and air conditioning upgrades. Works were completed during the reporting period.
320 154226 458867 1-3 years
Energy efficiency: Building services
Energy efficiency initiatives implemented at retail sites (branches and business banking centres) during the reporting period as part of the regulatory Energy Efficiency Opportunities Program. These initiatives focused on reducing Scope 2
59 19073 28500 1-3 years
Activity type
Description of activity
Estimated annual CO2e
savings (metric tonnes CO2e)
Annual monetary savings
(unit currency -
as specified in Q0.4)
Investment required (unit currency - as specified in
Q0.4)
Payback period
emissions though lighting upgrades, the installation and/or rescheduling of timers.
Energy efficiency: Building services
Energy efficiency initiatives implemented at commercial offices during the reporting period as part of the regulatory Energy Efficiency Opportunities Program. These initiatives focused on reducing Scope 2 emissions though lighting, BMS and HVAC upgrades, installation and/or rescheduling of timers, activation of sleep mode on IT equipment, and better management and monitoring of data.
2753 771205 2988832 1-3 years
Energy efficiency: Building services
Other voluntary energy efficiency initiatives (Scope 2 reductions) at commercial offices, generally conducted as part of repair and maintenance or upon request. Works included lighting upgrades, rescheduling timers and rationalizing CRAC units. Works were completed during the reporting period.
362 161085 120680 <1 year
Energy efficiency: Building services
Energy efficiency initiatives implemented at data centres during the reporting period as part of the regulatory Energy Efficiency Opportunities Program. These initiatives focused on reducing Scope 2 emissions though decommissioning redundant technology, resizing power factor correction units, lighting upgrades, installing variable speed drives and better management and monitoring of data.
5548 586964 324523 <1 year
Transportation: fleet
Reducing the types of vehicles from nine to four with better fuel efficiency credentials. Drivers are to use/purchase E10 provided the vehicle they are using supports the use of E10. A driver education training program is currently being implemented which includes information on fuel efficient driving.
268 151786 0 1-3 years
3.3c
What methods do you use to drive investment in emissions reduction activities?
Method
Comment
Method
Comment
Compliance with regulatory requirements/standards
The Group is required to identify energy efficiency opportunities for 80% of our Australian Corporate Group over 4 years (to 2013-14) as part of the Energy Efficiency Opportunities Act.
Dedicated budget for energy efficiency
The Group has a dedicated environmental budget for its properties, of which, approximately 90% is spent on energy efficiency and carbon reduction projects for property functions (lighting, HVAC, etc) and the remainder is spent on water and waste projects. Property functions account for roughly 75% of the Group's emissions (based on energy assessments completed over the last two years).
Internal incentives/recognition programs
Sustainability is included as a category in the balanced scorecard of all employees and performance against the scorecard determines an employee’s bonus. For many employees this category is related to climate change activities e.g. advocating for or implementing emission reduction initiatives.
Employee engagement Employees are engaged through the 'Our Tomorrow Champions' employee action program which includes invitations to presentations and workshops, Earth Hour and World Environment Day activities, as well as building specific and general information posted on the intranet and onsite.
Other We engage with clients to encourage them to invest in emissions reduction activities for example holding environmental savings programs for SME customers.
Internal price of carbon The Westpac Group includes a AUD23 price on carbon for all property-related energy efficiency business cases. This price is pegged to the Australian carbon price.
Other The Westpac Group participates in the NSW Energy Saving Scheme and Victorian Energy Efficiency Target programs which allow us to create and sell carbon certificates for eligible energy efficiency works. The income derived from these programs is used to reduce project payback and is fed back into energy and energy efficiency budgets.
Other Compliance with the Westpac Group targets as noted in Tables 3.1b and 3.1c.
3.3d
If you do not have any emissions reduction initiatives, please explain why not
Page: 4. Communication
4.1
Have you published information about your company's response to climate change and GHG emissions performance for this reporting year in places other than in your CDP response? If so, please attach the publication(s)
2, 5, 6, and 9 https://www.cdproject.net/sites/2013/51/19051/Investor CDP 2013/Shared Documents/Attachments/Investor-4.1-C3-IdentifytAttachment/Investor-4.1-PublishedInformation2/Environment_factpac 2012.pdf
In other regulatory filings (complete) 52-55 https://www.cdproject.net/sites/2013/51/19051/Investor CDP 2013/Shared Documents/Attachments/Investor-4.1-C3-
IdentifytAttachment/Investor-4.1-PublishedInformation3/2013-2017_Sustainability_Strategy.pdf In voluntary communications (complete)
Whole Document https://www.cdproject.net/sites/2013/51/19051/Investor CDP 2013/Shared Documents/Attachments/Investor-4.1-C3-IdentifytAttachment/Investor-4.1-PublishedInformation8/Westpac Climate Change Position and action plan 2009-2013.pdf
Whole Document https://www.cdproject.net/sites/2013/51/19051/Investor CDP 2013/Shared Documents/Attachments/Investor-4.1-C3-IdentifytAttachment/Investor-4.1-PublishedInformation10/Carbon Update - Australian edition - 24 April 2013.pdf
In voluntary communications (complete)
Whole Document https://www.cdproject.net/sites/2013/51/19051/Investor CDP 2013/Shared Documents/Attachments/Investor-4.1-C3-IdentifytAttachment/Investor-4.1-PublishedInformation11/Daily market prices and commentary provided for subscription service CE Daily.docx
Have you identified any climate change risks (current or future) that have the potential to generate a substantive change in your business operations, revenue or expenditure? Tick all that apply Risks driven by changes in regulation Risks driven by changes in physical climate parameters Risks driven by changes in other climate-related developments
5.1a
Please describe your risks driven by changes in regulation
ID
Risk driver
Description
Potential impact
Timeframe
Direct/Indirect
Likelihood
Magnitude of impact
1RR International agreements
There is a risk that failure to finalise a post-Kyoto agreement will lead to uncertainty & has the potential to further undermine carbon markets in Australia, New Zealand & in traded international units.
Inability to do business Current Direct About as likely as not Medium
2RR Cap and trade schemes
The Australian Carbon Price Mechanism commenced 1 Jul 2012. There are a number of significant compliance obligations for financial institutions in the first year of the scheme.
Inability to do business Current Direct Virtually certain Medium
3RRUncertainty surrounding new regulation
The Australian Carbon Price Mechanism is commenced 1 Jul 2012. The Federal Opposition has stated that it will repeal the scheme if they win election (scheduled for September 2013). This will have compliance and revenue obligations for market participants.
Inability to do business 1-5 years Indirect (Client)
More likely than not
Medium-high
4RR Cap and trade The New Zealand Emission Trading Scheme has Reduced demand for 1-5 years Indirect More likely Low
ID
Risk driver
Description
Potential impact
Timeframe
Direct/Indirect
Likelihood
Magnitude of impact
schemes been in operation since FY10 and was reviewed in 2012. Uncertainty around the transition from the Kyoto Protocol to a post 2015 international agreement is creating ongoing uncertainty in the market.
goods/services (Client) than not
5RREmission reporting obligations
There are a number of mandatory reporting schemes in relation to emissions & energy efficiency administered at state & national levels with which we are required to comply. The key schemes are the Australian National Greenhouse & Energy Reporting Scheme (NGERs), Energy Efficiency Opportunity Act & Energy & Water Savings Initiatives. There are potential financial penalties for non-compliance as well as reputational impacts.
Other: Non compliance & associated penalities & reputation risk
Current Direct Virtually certain Low
6RR Fuel/energy taxes and regulations
A major review of the Renewable Energy Target (RET) was undertaken in Australia in 2012, on the scheme target and key design elements. This is subject to review again in 2014, and is likely to be examined after the September 2013 Federal Election. This is creating ongoing investment uncertainty.
Inability to do business Current Direct More likely than not Medium
7RRProduct labeling regulations and standards
Environmental claims are considered under the Trade Practices Act & reviewed by the Australian Consumer & Competition Commission (ACCC).
Other: Reputation Current Direct Virtually certain Low
8RR
General environmental regulations, including planning
Changes to planning laws have the potential to impact major property or infrastructure projects in addition to mortgage valuations & insurance portfolios at the residential level.
Inability to do business Current Indirect (Client)
More likely than not Medium
9RR Other regulatory drivers
The introduction of the Carbon Farming Initiative & potential impacts on valuation & revenue streams for agribusiness customers.
Other: Potential impact on valuations serving as underlying mortgage security & compliance related costs
Current Indirect (Client)
Virtually certain
Low-medium
5.1b
Please describe (i) the potential financial implications of the risk before taking action; (ii) the methods you are using to manage this risk and (iii) the costs associated with these actions International (Int’l) agreements & carbon markets (1RR, 2RR & 4RR) (i)Int’l & national policy decisions around carbon market design have direct financial implications on 3 fronts: understanding client exposure; pricing risk in transactions & through financial markets trading carbon. These are concentrated in WIB (operating income of AUD3,190m; total assets AUD97.8bn FY12), of which the division FX&CCE contributes 17% or AUD526m of revenue. (ii) Westpac’s business strategy integrates regulatory uncertainty & embeds carbon management into BAU e.g. regulatory risk is monitored by Enterprise Compliance & Regulatory Affairs & logged in Regulatory Change Register. We focus on assisting clients to transition to a carbon constrained operating environment & meet their carbon price risk hedging needs. Westpac trades in the EUETS, is the largest financial intermediary in the NZETS & trades the Aust. market. Carbon risk is priced in our credit risk assessment framework. We conduct an annual review of carbon price Impacts across our portfolio, results are reported to the Board. (iii)Regulatory uncertainty on ongoing scheme operation, review or repeal has financial implications for our carbon trading business . Approx 96 companies have compliance obligations in the NZ market while over 300 companies in the Aust. scheme, many of whom are our customers. Emission reporting obligations (i) We face non-compliance costs arising from failure to report under the Aust. National Greenhouse & Energy Reporting (NGER) Act which carries a AUD220k & potential brand damage. We also face costs for non-compliance from failure to report under the EEO Program & related environmental obligations at both state & national levels. In NZ we are independently certified against Certified Emissions Measurement & Reduction Scheme (CEMARS) (ii)We have in place documented procedures for compliance, reviewed by internal & external auditors, & supported by an EMS & online reporting tool. (iii) Key costs include FTE & external audit in the order of AUD125k. Renewable Energy Regulation (i)In 2012, the Aust Renewable Energy Target (RET) was subject to a major review around key design elements. However, Federal Opposition has indicated it will re-examine the RET as part of its environmental policy consultation process if elected in September 2012. This is creating ongoing regulatory uncertainty, hindering investment in energy generation, creating price volatility & inhibiting forward trading in the National Electricity Market (NEM). Westpac is the largest financial intermediary in the NEM & trades Renewable Energy Certificates (RECs) under the Renewable Energy Target (RET) framework. Of total infrastructure & utilities financing (AUD2,727m) over 50% is hydro & renewables. Carbon and electricity are traded in FX&CCE division, 17% (AUD526m) of total WIB operating income (AUD3,190m). Transport fuels are excluded from the Aust. carbon market, but an equivalent carbon price (via fuel tax credit reductions) will apply to some business transport emissions, non-transport use of liquid & gaseous fuels. Aviation & large fuel users can opt-in from 2014. These impact operational costs & client inputs. (ii) We have engaged with Goverment at all levels on the investment implications of policy developments. We have a Renewable Energy Strategy targeting AUD20bn in new investment required to meet the Aust RET target. Involvement in the renewables market inc financial relationships with energy retailers, Energy Intensive Trade Exposed Entities (EITEs), financing for large scale renewable energy projects & small business involved in the installation of small generation & solar hot water units & portfolio trading in related electricity, RECs, commodities & carbon markets. We have published Financing Sustainable Energy position statement addressing these issues (attached) & review our industry sector strategy annually. (iii)Consistent with our organic growth strategy, key costs have been the development of training for employees (>1,800 FTE 2011-13) & salary costs associated with time spent on strategy development, completion of tools for risk hedging & adjustments to existing policies & processes (underwriting standards), estimated to be in excess of AUD600k. Product efficiency/labelling: The Trade Practices Act (TPA) & ACCC regulate environmental claims & legitimacy of immediate carbon cost pass through implications following the intro of the Aust. carbon price. (i)These impact supply chain management, procurement standards, credit decisions in investment/lending as well as potential reputation risk. It also governs our own claims. (ii)We have in place a Sustainable Supply Chain Management framework covering all suppliers & specific procurement guidelines for paper & technology. We delivered mandatory training to approx 100 employees on managing carbon risk pass through in procurement & supplier contracting. Credit risk is addressed via our ESG Credit Risk policy framework & position statements. Our env performance is independently verified & forms the basis of our claims in customer advertising, also reviewed by our legal team. (iii)The main potential costs are associated with ongoing external validation of suppliers (AUD76,145 FY11) as well as FTE to manage the process & changes to credit standards. Independent verification of our env claims is inc within annual reporting costs (AUD150,000 FY11) & review of marketing materials against The TPA & Australian Competition and Consumer Commission (ACCC) regulations & absorbed within BAU legal costs.
General env regulations & other drivers (i)Changes to planning laws has potential to impact major infrastructure projects, residential mortgage & insurance portfolios. The introduction of the Carbon Farming Initiative for domestic offset originations projects in Aust signifies that properties can separately register & sell Land, Water & Carbon Titles. This also has significant implications for underlying security valuation models. Westpac has client exposure to land use & forestry sequestration activities aimed at generating carbon offset credits, particularly via the Aust & NZ markets. Around NZD250m of NZ Units (NZUs) have been allocated to forestry, trade exposed & associated industries since NZETS commencement while annual liabilities are worth approx NZ119m pa. Around 10% of Westpac business lending & 4% of business lending from SGB was directed towards forestry & agribusiness as at FY11. Carbon risk considerations for Westpac inc certainty of cash flow for carbon project origination, certainty around security implications for landowners & liability for all eligible interests (inc lenders). (ii)Impacts for land valuation is undertaken independently & we are working with suppliers to establish appropriate protocols. Work is underway via ESG Credit Risk teams to examine potential associated operational & credit risks to determine financial impacts. A network of carbon champions across regional areas work with clients. (iii)The primary costs associated with these actions have been FTE, training & development costs as outlined above.
5.1c
Please describe your risks that are driven by change in physical climate parameters
ID
Risk driver
Description
Potential impact
Timeframe
Direct/Indirect
Likelihood
Magnitude of impact
1RRChange in mean (average) temperature
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. This includes a report by the CSIRO and Bureau of Meteorology (attached). It projects Australian average temperatures are to rise by 0.6 to 1.5 degrees Celcius by 2030 and in the range of 1.0 to 5 degrees Celsius by 2070. Annual-average daily mean temperatures have increased by 0.9 degrees Celsius since 1910.
Other: Indirect impacts on customer viability, increase in operating costs
Current Direct Virtually certain Low
2RRChange in temperature extremes
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within
Other: Indirect impacts on customer viability, business continuity
>10 years Indirect (Client)
Virtually certain
Low-medium
ID
Risk driver
Description
Potential impact
Timeframe
Direct/Indirect
Likelihood
Magnitude of impact
Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. This includes a report released by the CSIRO and Bureau of Meteorology which states that since 1920 Australian annual-average daily maximum temperatures have increased by 0.75 degrees Celsius and overnight minimum temperatures have warmed by more than 1.1 degrees Celsius. In addition the Angry Summer report released by the Climate Commission in 2013 highlighted an extreme heatwave that impacted 70% of the continent in Dec/Jan and saw the hottest ever area averaged temperature nationally as well as new maximum highs recorded at 44 weather stations.
planning
3RRChange in mean (average) precipitation
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate.
Other: Indirect impacts on customer viability, business continuity planning
1-5 years Indirect (Client)
Virtually certain
Low-medium
4RRChange in precipitation pattern
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. The short and long-term physical impacts for Australia have been summarised in a report released by the CSIRO and Bureau of Meteorology. The report charts temperature and rainfall changes already observed as well as likely trends and states that there has been a trend over recent decades towards increased spring and summer monsoonal rainfall across Australia’s north, higher than normal rainfall across the centre, and decreased late autumn and winter
Other: Indirect impacts on customer viability
Current Indirect (Client)
Virtually certain
Low-medium
ID
Risk driver
Description
Potential impact
Timeframe
Direct/Indirect
Likelihood
Magnitude of impact
rainfall across the south. The Climate Commission's Angry Summer report also highlights an increase in extreme rainfall events on Australia's east coast.
5RR
Change in precipitation extremes and droughts
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. The short and long-term physical impacts for Australia have been summarised in a report released by the CSIRO and Bureau of Meteorology. The report charts temperature and rainfall changes already observed as well as likely trends and shows that rainfall has increased in the north and decreased in the south and east - sea surface temperatures have increased by about 0.4 degrees. It also predicts further decreases in rainfall are likely in the south with an increase in intense rainfall events in many areas. and states that an increase in the number of droughts is expected in southern Australia but it is also likely that there will be an increase in intense rainfall events in many areas. This is reinforced by the Climate Commission's Angry Summer report which highlighted an increase in extreme rainfall events on Australia's east coast. we are also seeing increased drought conditions in New Zealand.
Other: Indirect impacts on customer viability, business continuity planning
Current Indirect (Client)
Virtually certain Medium
6RR Sea level rise
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. Populations in our key markets are densely concentrated in a relatively small number of larger coastal
Other: Indirect impacts on customer viability, business continuity planning
>10 years Indirect (Client)
Virtually certain Medium
ID
Risk driver
Description
Potential impact
Timeframe
Direct/Indirect
Likelihood
Magnitude of impact
cities or coastal areas which are potentially exposed to rising sea levels and storm surges. For instance around 85% of Australia’s population live in coastal areas while research by the Australian Department of Climate Change & Energy Efficiency has found that up to $63bn (replacement value) (attached) of existing residential buildings are potentially at risk. This is also of concern within the Pacific Islands where sea level rise will lead to increased salination of coastal plains. The short and long-term physical impacts for Australia have also been summarised in a report released by the CSIRO and Bureau of Meteorology. which states that global-average mean sea level from 2011 was 210 mm above the level in 1880 and rose faster between 1993 and 2011 than during the 20th century as a whole.
7RR
Tropical cyclones (hurricanes and typhoons)
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. The short and long-term physical impacts for Australia have been summarised in a report released by the CSIRO and Bureau of Meteorology which states that it is likely (with more than a 66 per cent probability) that there will be fewer tropical cyclones in the Australian region, on average, but the proportion of intense cyclones is expected to increase.
Other: Indirect impacts on customer viability, business continuity planning
Current Indirect (Client) Likely Low
8RR
Induced changes in natural resources
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. The Australian and New Zealand climates
Other: Indirect impacts on customer viability
>10 years Indirect (Client)
Virtually certain
Low-medium
ID
Risk driver
Description
Potential impact
Timeframe
Direct/Indirect
Likelihood
Magnitude of impact
are already highly variable and pre-disposed towards extreme weather events, whilst their ecosystems are finely balanced and often unique making them particularly vulnerable to impacts on biodiversity and natural resources.
9RR Uncertainty of physical risks
Typically information on the physical risks is at a regional or national level, which can make it difficult to determine the likelihood of events in specific locations where we may have physical premises, dependencies on infrastructure (for instance power or water supply) or the location of major lending and investment holdings.
Other: Indirect impacts on customer viability, business continuity planning
Current Indirect (Client) Very likely Medium
5.1d
Please describe (i) the potential financial implications of the risk before taking action; (ii) the methods you are using to manage this risk; and (iii) the costs associated with these actions Each of the physical risks outlined above have direct and indirect implications for Westpac (note the primary impact of this risk has been listed in the table above as direct or indirect although both exist). Operational Risk (direct impacts to own operations) (i) As the provider of financial products and services Westpac needs to maintain an efficient capital base. As a result we are not a significant holder of physical property assets. For instance as at HY13 of Westpac’s AUD$677.5 billion in assets only AUD$1.1 billion is in operational property, plant and equipment. This means that the main financial implications for the Group occurring directly from physicals risks are in the form of disruptions to business continuity, customer services and employee wellbeing. In the short term the key risk is an increase in significant weather events driven by an increase in mean average temperature. For instance General Insurance revenue was down $34 million from claims associated with a series of major weather events in 2011 including hail storms in Victoria flooding and storms in Queensland and New South Wales. (ii) Westpac has in place business continuity plans (BCP) for all its operations, including requiring a BCP from all key suppliers. Most recently this has led to the development of the 'bank in box' that can be deployed to emergency relief centres and other locations to provide services to impacted customer and provide continuity of service in the event of our physical branch being unavailable for operation as was the case with recent floods in Maryborough, Queensland. The operational risk framework scenario analysis is used to consider the impact of extreme but plausible events on the Group’s operations and is an input to the Operational Risk Capital Model. In addition to this, compulsory employee training modules on occupational, health and safety (OH&S) include a section on what to
do in the event of a major storm or other weather event together with information on heat stress as well specific programs on tropical diseases in our Pacific operations. Furthermore, crisis management plans have been actioned, including the roll out of emergency response teams during recent natural disasters in Australia and New Zealand. Westpac’s Community Volunteering Policy contains specific provisions for employees involved in the State Emergency Services, Rural Fire Service or other emergency organisations to support extended leave of absence during natural disasters. (iii) As much of our response is embedded into existing OH&S and compliance, training and wellbeing functions it is difficult to isolate specific climate change related costs for these activities. However approximate costs for the creation of learning modules, including additional information on the intranet and the employment of FTE focused on natural disasters would be in the order of AUD600K. Lending and Investment (indirect impacts) (i) Physical risks will increasingly impact return on investment (ROI) in longer term investment and lending decision making, such as for large fixed infrastructure and utilities assets (project finance). In addition, we finance many industries that are particularly vulnerable to changes in climate, for instance agriculture and tourism. Given that approximately 85% of Australia’s population live in coastal areas and will be at risk of increased flooding, storm surge and sea level rise there also longer term impacts for Westpac’s mortgage and business portfolio. Research by the Australian Government’s Department of Climate Change has found that up to AUD$63 billion (replacement value) of existing residential buildings are potentially at risk of inundation from a 1.1 metre sea-level rise. This poses a risk to Westpac, as our current mortgage exposure in Australia is valued at AUD316bn (as at 31 March 2013). An example of the potential impacts occurred in FY12 when significant natural disasters were experienced in both Australia and New Zealand. Over AUD150m was paid for natural disaster General Insurance claims made in 2011 and revenue was down AUD34m from claims associated with the catastrophic events during the first half of 2012. These included the Victorian Christmas Day hail storm, the floods of Roma, Moree and the Murrumbidgee River, and the storms in New South Wales, Queensland (January) and Townsville (March). While it is not possible to directly attribute these occurrences to climate change, they provide an important indication of the cost of extreme natural disasters. (ii) Westpac has undertaken a number of activities to help understand and mitigate these risks. This has included stakeholder engagement with clients, scientific organisations and environmental groups to understand both the issues and best practice approaches to management within our client base. Our sectoral level understanding has also been enhanced by our involvement in the Climate Institutes Climate Partners Network’s report ‘Coming Ready or Not’ examining the level of preparedness amongst major industry sectors in relation to adaptation risk. Consideration of these environmental risks has been incorporated into the Group’s ESG risk framework. For instance an assessment of physical risk implications are incorporated into ESG credit risk assessment policies and processes, for high risk areas. In addition flood insurance premiums are calculated based on street address acknowledging the highly localised nature of this risk based on topography. Furthermore, within our agribusiness carbon and water champions have been established in each state. This sector is impacted by water trading due to scarcity issues and these champions provide advice on water and carbon related impacts for these customers. More recently Westpac has become more actively engaged with communities in high risk areas in Queensland impacted by floods, storm surges and cyclones. This has seen the redirection much of post disaster donations towards funding resilience measures, for instance working with Volunteering Queensland to run over 100 workshops on the importance of BCP within the SME sector to help prepare for weather and other events as this can be a particularly vulnerable part of the local economy after a major weather event. (iii) Whilst a number of these activities e.g. advocacy are funded within existing programs and FTE, our research and work with vulnerable communities and sectors and the establishment of agri advisors in each state has seen Westpac invest over AUD1.5m in activities specifically designed to mitigate this risk.
5.1e
Please describe your risks that are driven by changes in other climate-related developments
ID
Risk driver
Description
Potential impact
Timeframe
Direct/Indirect
Likelihood
Magnitude of impact
1RR Reputation
In many of our major markets of operation, but most notably in Australia, climate change remains a divisive issue. This brings with it potential reputational risks from both sides of the debate, i.e. concerns that the organisation is doing too much or too little. In particular has been a rise in campaigning by NGOs in relation to the financing of coal fired power stations & related industries.
Reduced demand for goods/services
Current Direct Very likely Low-medium
2RRChanging consumer behaviour
Whilst there is evidence of retail consumers making 'green' purchasing decisions in some product categories, most notably energy, household goods & lower emission vehicles, take up of 'green' retail banking products remains low, without significant discounting as evidenced by the success of an interest free loan program run by the Federal Government in 2009/2010. What we are seeing is environmental credentials being factored into brand selection for retail customers. This can, but is not always, linked to a specific issue or public campaign, for instance energy financing activities.
Reduced demand for goods/services
1-5 years Direct Very likely Low-medium
3RRIncreasing humanitarian demands
As the incidence of natural disasters increase there are increasing obligations on companies to provide both direct & indirect support to impacted communities. Over the long-term this will place pressure on governments in relation to the potential relocation of communities, which will have flow on risk for companies.
Increased operational cost Current Direct Very likely Low
5.1f
Please describe (i) the potential financial implications of the risk before taking action; (ii) the methods you are using to manage this risk; (iii) the costs associated with these actions Reputation and changing consumer behaviour (1RR &2RR) (i) Whilst the majority of stakeholder concerns are related to activities undertaken in WIB the reputational risks arise primarily through the retail networks and to a
lesser extent via shareholder activism. Putting this into perspective in FY12 total exposures to non-renewable energy through WIB were AUD1,317m but the focus of reputation activities are on the retail business which had cash earnings of AUD3,998m in the same period and total assets of $436.8 billion for the same period. Within Australia in particular, climate change is a high profile political issue and it remains challenging for financial institutions to play a constructive role in the debate while balancing competing customer interests and community sentiment with reputational risks occurring from both sides of the debate. There is heightened scrutiny on the role of banks in supporting emerging clean energy or technology &/or high emitting industrial activities. This has included specific campaigns from Greenpeace in regards to the financing of new coal fired energy generation in FY11 and more recently campaigns by Market Forces on the financing of energy and ports projects within the Great Barrier Reef World Heritage Area. (ii) These risks are primarily managed through: • Ongoing engagement with a range of stakeholders – including customers, NGOs, suppliers, the general community, scientific community and industry associations, in order to understand the range of views and complexity of the issue, for instance, in the development of our financing sustainable energy policy; • Ongoing monitoring and materiality assessments – this occurs through the reputation risk framework as well as broader reviews of material issues for the organisation; • The development of a clear company position on the issue endorsed by the Board and ET, for instance the Climate Change Position Statement which includes clear objectives and Financing Sustainable Energy as well as a publicly available target for increased lending and investment to the CleanTech and Environmental Services sector ($6 billion by 2017); • Incorporation of this position into the relevant risk frameworks, including frameworks for ESG and Reputation Risk approved by the BRMC as well as changes to the relevant credit manuals and policies; • Transparent reporting, for instance Westpac has reported its total exposures (both direct and indirect) to the energy sector since 2008 and the percentage breakdown into renewable, brown coal, black coal, gas, liquid gas and hydro in response to stakeholder interest. With current exposures to the renewable and hydro sectors accounting for 57.7% of this. • Internal awareness, education and capacity building – this has included the creation of a dedicated intranet section including tools for client engagement supported by carbon and climate change training to help relationship managers engage with clients to understand their position, levels of preparedness & concerns as well as communicate the context for Westpac’s view & activities. More broadly focus of Doing the Right Thing ('Acting with Integrity' module), inc in employee inductions, focuses on sustainability & states that for the Westpac Group sustainability encompasses everything from our financial performance to our lending & investment decisions. (iii) Costs associated with managing this approach have included externally facilitated stakeholder engagement sessions, the development of the Doing the Right Thing training modules, employee resources undertaking the engagement, developing the ESG framework and policy statements, managing public reporting as well training and development programs on climate and carbon and external assurance costs over publicly reported information. These costs are in the range of AUD2-3m dollars not including the salary costs of participants attending training sessions. Increasing humanitarian demands (3RR) (i) As the physical effects of climate change intensify we expect impacts on communities will increase. In addition to costs associated with provisioning & ensuring business continuity companies will be expected to contribute to the broader rebuilding or relocation of the communities in which they operate. For example in response to widespread flooding on the east coast of Australia and cyclones in Queensland $2 million was provided in donations to communities impacted by weather related natural disasters and $36 million was provisioned at the HY11. (ii) There are a number of ways Westpac responds to this potential risk by including: • Formal support packages available to impacted customers that can be quickly deployed together with ongoing support to help customers financially recover. • Shifting the proportion of donations that are provided directly to communities in support of resilience activities to lessen the impacts of future events, for instance business continuity planning workshops for SME businesses impacted by flooding in Queensland. • Advocating for a greater policy focus on investment in increasing community resilience before a disaster occurs from all levels of Government. This work has been undertaken in conjunction with a number of other companies as part of the Australian Business Roundtable for Disaster Resilience and Safer Communities http://australianbusinessroundtable.com.au/
(iii) Total annual costs associated with the activities listed above are in the order of $500,000 - $1,500,000 depending on the number of significant weather events.
5.1g
Please explain why you do not consider your company to be exposed to risks driven by changes in regulation that have the potential to generate a substantive change in your business operations, revenue or expenditure
5.1h
Please explain why you do not consider your company to be exposed to risks driven by physical climate parameters that have the potential to generate a substantive change in your business operations, revenue or expenditure
5.1i
Please explain why you do not consider your company to be exposed to risks driven by changes in other climate-related developments that have the potential to generate a substantive change in your business operations, revenue or expenditure
Page: 6. Climate Change Opportunities
6.1
Have you identified any climate change opportunities (current or future) that have the potential to generate a substantive change in your business operations, revenue or expenditure? Tick all that apply
Opportunities driven by changes in regulation Opportunities driven by changes in physical climate parameters Opportunities driven by changes in other climate-related developments
6.1a
Please describe your opportunities that are driven by changes in regulation
ID
Opportunity driver
Description
Potential impact
Timeframe
Direct/Indirect
Likelihood
Magnitude of impact
1OP International agreements
Should a post-Kyoto agreement be finalised it will bring with it opportunities to increase market participation, design financial products to service the new arrangements & have greater certainty around forward pricing
New products/business services
Current Indirect (Client)
About as likely as not
Low-medium
2OP International agreements
Discussions are underway to link the Australian & New Zealand Emissions trading schemes, & in principle agreement has been reached to link the Australian & EU emissions trading schemes with details still being finalised.
Increased demand for existing products/services
1-5 years Indirect (Client)
About as likely as not
Low-medium
3OP Cap and trade schemes
Thecommencement of the floating price period under the Carbon Price Mechanism in Australia (post 2015) and finalisation of the key implementation elements, will generate further opportunities. These include price risk hedging & finance solutions for customers directly covered by the scheme as well as new support industries in areas such as energy efficiency or clean energy for example.
New products/business services
1-5 years Indirect (Client) Very likely Medium-
high
4OP Cap and trade schemes
Westpac was the first and is the principal market maker in the NZ ETS. This has provided opportunities to develop products & services to assist customers impacted by the scheme & provides valuable insights for clients in the first few years of the operation of the Australian carbon market.
New products/business services
Current Indirect (Client)
Virtually certain Low
5OPEmission reporting obligations
Our Australian operations are subject to mandatory reporting under a range of Federal & State frameworks. These require us to report Scope 1 & 2
Reduced operational costs Current Direct Virtually
certain Low
ID
Opportunity driver
Description
Potential impact
Timeframe
Direct/Indirect
Likelihood
Magnitude of impact
emissions, energy consumption & production & energy efficiency opportunities. This has provided opportunities for improved benchmarking & identification of cost savings associated with identified opportunities to reduce energy consumption. In addition, it has provided more robust data on large clients to be able to assist in credit & investment decisions.
6OPOther regulatory drivers
Finalisation of the Renewable Energy Target in Australia has delivered some investment certainty for renewable energy projects in the short term, with improved finance oppportunities.
Investment opportunities Current Indirect
(Client) Virtually certain
Low-medium
7OPOther regulatory drivers
The Australian Clean Energy Finance Corporation (CEFC) is a $10bn fund to accelerate the deployment of renewable energy in Australia has been established and we are in ongoing discussions regarding financing opportunities.
Investment opportunities Current Indirect
(Client) Virtually certain
Low-medium
8OPOther regulatory drivers
The Carbon Farming Initiative within Australia will bring additional revenue streams for agribusiness clients & provide new project finance opportunities. It is also an important source of supply during the fixed price period of the Australian Carbon Price Mechanism.
New products/business services
1-5 years Indirect (Client) Very likely Low
6.1b
Please describe (i) the potential financial implications of the opportunity; (ii) the methods you are using to manage this opportunity and(iii) the costs associated with these actions International (Int’l) agreements & carbon markets (i)Int’l & national policy decisions around carbon market design have direct financial implications on 3 fronts: understanding client exposure; pricing risk in transactions & through financial markets trading carbon. Approx NZD250m of NZ Units (NZUs) have been allocated to forestry, trade exposed & associated industries since NZETS commencement while annual liabilities are worth approx NZD119m pa. Approx 75 companies are covered by the NZETS & more than 300 will be directly covered by the Aust. market, most of whom are Westpac clients These are concentrated in WIB (operating income of AUD3190m; total assets AUD97.8bn FY12), of which the division FX&CCE contributes 17% or AUD526m of revenue. When managed well, all create
potential opportunities for Westpac, inc enhanced risk management, new products, services & revenue streams. (ii) Westpac’s organic business strategy is designed to accommodate ongoing regulatory uncertainty & seeks to embed carbon management into BAU. Our response focuses on assisting customers’ transition to a carbon constrained operating environment & meeting their carbon price risk hedging needs, via our Commodities, Carbon & Energy (CCA) division. FX&CCE had operating income of AUD526m in FY12, 17% of total WIB revenue. Westpac trades the EUETS, int’l credits, is the largest financial intermediary in the NZETS & trades the Aust market. Building skills & capacity we have trained over 1800 FTE over FY11-12 focusing on the latest developments, anticipated client impacts & emerging opportunities. A dedicated team brings together expertise to develop carbon & carbon related solutions for customers. This includes debt & equity funding for emerging business opportunities in the domestic offset sector (forestry & agriculture), clean energy opportunities, energy efficiency, internal abatement financing requirements & carbon credit off-take, price risk management & origination activities. Sample deals include partnering with Perenia on CDM origination, partnering with Carbon Trade Exchange to support carbon trading platforms & an Energy Efficient Equipment Lease (attached) to support carbon abatement activities across a wide range of industries. (iii) The major item of cost is FTE allocation, training & BAU operational expenses. Emission reporting obligations (i)We are covered by reporting obligations under the Australian National Greenhouse & Energy Reporting (NGER) Act as well as Energy Efficiency & Environmental compliance obligations. Failure to comply carries an AUD220k fine & daily penalties. This creates opportunities for both our own operations & for new products & services. (ii)Uniform & consistent standards across all jurisdictions strengthens our ability to identify, cost & invest in operational upgrades to improve energy efficiency across the business, & thereby reduce ongoing operational costs. We have developed a marginal abatement cost curve (MACC) to guide investment in large scale energy efficiency & carbon reduction projects applying an internal carbon price of AUD25/ t. We have a dedicated budget for energy efficiency for Australian properties, accounting for the majority of total Group emissions. The introduction of the Mandatory Disclosure requirements for the property sector & related policies are also generating new opportunities for investment in energy efficiency & technological upgrades, which reduce emissions. Westpac is working with clients in impacted sectors, local Govt & Low Carbon Australia, to pursue emerging funding models to support greater investment. (iii) The Report of The Prime Minister’s Task Group on Energy Efficiency (attached) stated that the Aust Govt has announced over AUD4bn in support for energy efficiency measures. Other regulatory drivers (i)We are the largest financial intermediary in the National Electricity Market & Trade Renewable Energy Certificates under the Renewable Energy Target framework. Of total infrastructure & utilities financing (AUD2,565m at FY11) approx 50% is hydro & renewables. The introduction of the Aust. Carbon Farming Initiative will create opportunities for project origination, lending & investment & credit offtake agreements to complement our NZ experience. It also suggests that properties can have separately registered Land Title, Water Title & Carbon Title sold independently. This has significant implications for our underlying security valuation models. We have client exposure to land use & forestry sequestration activities aimed at generating carbon offset credits, particularly in the Aust & NZ markets. Approx NZD250m of NZU have been allocated to forestry, trade exposed & associated industries since NZETS commencement, while annual liabilities are worth approx NZD119m pa. Around 10% of Westpac business lending & 4% of business lending from SGB was directed towards forestry & agribusiness at FY11. (ii)We have engaged with Govt at all levels on the investment implications of policy developments. Westpac has a renewable energy strategy targeting AUD20b in new investment required to meet the Aust. RET target. Involvement in the renewables market includes financial relationships with energy retailers, Energy Intensive Trade Exposed entities (EITEs), financing for large scale renewable energy projects & small business involved in the installation of small generation & solar hot water units, & portfolio trading in related electricity, RECs, commodities & carbon markets. We have published a Financing Sustainable Energy (attached) position statement addressing both issues, outlining our approach. We are also working with Agribusiness & Commercial Banking clients to understand their emerging risks & opportunities, & implementing practical products & solutions to assist. Around 20 Carbon Champions have been designated across agribusiness & regional banking divisions. In 2011, Westpac, Baker & McKenzie & Landcare Australia partnered to deliver a series of free workshops on the legal, financial & environmental considerations around the Carbon Farming Initiative. (iii)Consistent with our organic growth strategy, key costs were in the development & training of employees (>1,800 FTE FY2011-12) & salary costs associated with the spent on strategy development, the completion of tools for risk hedging & adjustments to existing policies & processes (underwriting standards). A new strategy is being finalised to support increased investment & lending in the forestry & carbon farming sector in carbon origination projects in Aust & NZ following the finalisation of regulatory frameworks. Approx 10% of Westpac & 4% of SGB business lending was directed towards forestry & agribusines at FY11.
6.1c
Please describe the opportunities that are driven by changes in physical climate parameters
ID
Opportunity driver
Description
Potential impact
Timeframe
Direct/ Indirect
Likelihood
Magnitude of impact
1OPChange in mean (average) temperature
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. This includes a report by the CSIRO and Bureau of Meteorology (attached). It projects Australian average temperatures are to rise by 0.6 to 1.5 degrees Celcius by 2030 and in the range of 1.0 to 5 degrees Celsius by 2070. Annual-average daily mean temperatures have increased by 0.9 degrees Celsius since 1910.
Investment opportunities Current Indirect
(Client) Virtually certain Low
2OPChange in temperature extremes
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. This includes a report released by the CSIRO and Bureau of Meteorology which states that since 1920 Australian annual-average daily maximum temperatures have increased by 0.75 degrees Celsius and overnight minimum temperatures have warmed by more than 1.1 degrees Celsius. In addition the Angry Summer report released by the Climate Commission in 2013 highlighted an extreme heatwave that impacted 70% of the continent in Dec/Jan and saw the hottest ever area averaged temperature nationally as well as new maximum highs recorded at 44 weather stations.
Investment opportunities >10 years Indirect
(Client) Virtually certain
Low-medium
3OPChange in mean (average) precipitation
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the
Investment opportunities 1-5 years Indirect
(Client) Virtually certain
Low-medium
ID
Opportunity driver
Description
Potential impact
Timeframe
Direct/ Indirect
Likelihood
Magnitude of impact
Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate.
4OPChange in precipitation pattern
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. The short and long-term physical impacts for Australia have most recently been summarised in a report released by the CSIRO and Bureau of Meteorology. The report charts temperature and rainfall changes already observed as well as likely trends and states that there has been a trend over recent decades towards increased spring and summer monsoonal rainfall across Australia’s north, higher than normal rainfall across the centre, and decreased late autumn and winter rainfall across the south.
Investment opportunities Current Indirect
(Client) Virtually certain
Low-medium
5OP
Change in precipitation extremes and droughts
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. The short and long-term physical impacts for Australia have been summarised in a report released by the CSIRO and Bureau of Meteorology. The report charts temperature and rainfall changes already observed as well as likely trends and shows that rainfall has increased in the north and decreased in the south and east - sea surface temperatures have increased by about 0.4 degrees. It also predicts further decreases in rainfall are likely in the south with an increase in intense rainfall events in many areas. and states that an increase in the number of droughts is expected in southern Australia but it is also likely that there will be an
Investment opportunities Current Indirect
(Client) Virtually certain Medium
ID
Opportunity driver
Description
Potential impact
Timeframe
Direct/ Indirect
Likelihood
Magnitude of impact
increase in intense rainfall events in many areas. This is reinforced by the Climate Commission's Angry Summer report which highlighted an increase in extreme rainfall events on Australia's east coast.
6OP
Induced changes in natural resources
As outlined in our position statement on climate change released in 2008 and in previous responses to CDP, we anticipate significant changes within our areas of operation over the near and long-term. The statement draws upon the work of the Intergovernmental Panel on Climate Change (IPCC), as well as domestic research undertaken within Australia, New Zealand and the Pacific, to identify projected impacts and emerging physical risks for the jurisdictions in which we operate. The Australian and New Zealand climates are already highly variable and pre-disposed towards extreme weather events, whilst their ecosystems are finely balanced and often unique making them particularly vulnerable to impacts on biodiversity and natural resources.
Investment opportunities >10 years Indirect
(Client) Very likely Low-medium
7OPOther physical climate opportunities
Typically information on the physical risks is at a regional or national level, which can make it difficult to determine the likelihood of events in specific locations where we may have physical premises, dependencies on infrastructure (for instance power or water supply) or the location of major lending and investment holdings.
Investment opportunities 1-5 years Indirect
(Client) Virtually certain
Low-medium
6.1d
Please describe (i) the potential financial implications of the opportunity; (ii) the methods you are using to manage this opportunity and (iii) the costs associated with these actions (i) The key opportunity associated with each of the physical risks listed above comes from the need for new technologies, industries and business models to assist in reducing the likelihood of these risks occurring (through abatement) and in managing the impact of them (adaptation). This creates new investment and lending opportunities from these new and/or growing segments. To this end, in Feb 2013 Westpac announced a target to lend and invest up to AUD$6bn in CleanTech and environmental services by 2017.
In addition delivering solutions to these risks can be a source of competitive advantage. For instance Westpac’s insurance business, BT includes flood cover, a feature not widely included by insurers at the time of the 2011 floods in Queensland. This has subsequently assisted in the overall brand positioning of this business reinforced with an advertising campaign, ‘Covered means covered’ http://www.westpac.com.au/personal-banking/insurance/covered-means-covered-lp/ (ii) There are a number of activities in place to manage this opportunity based on the development of specific strategies to identify and work with these sectors as well as broader engagement and positioning. Specific activities include: • The development of a strategy for renewable energy, supported by credit underwriting standards; • Broader engagement with customers within these emerging sectors based on potential rather than current size; • The establishment of a target for investment and lending to Cleantech and Renewables as well as a target to release one new product or service for retail and or business customers to help them manage their environmental impacts between 2013 and 2017; • Financial and in-kind support for events, research publications and practitioner networks as well as Westpac specific client events on issues relevant to these sectors; and • Factoring in a wider range of natural disaster coverage for insurance products to build market share (iii) The main costs associated with implementing this approach are FTE resourcing to undertake engagement activities, strategy development and supporting changes to policy and underwriting standards, marketing, sponsorship and other related costs. In any given year these costs are in the order of AUD1m.
6.1e
Please describe the opportunities that are driven by changes in other climate-related developments
ID
Opportunity driver
Description
Potential impact Timeframe
Direct/ Indirect
Likelihood
Magnitude of impact
1OP Reputation
In many of our major markets of operation, but most notably in Australia, climate change remains a divisive issue. This brings with it potential reputation opportunities from both sides of the debate, i.e. concerns that the organisation is doing too much or too little. There are opportunities to demonstrate leadership within the sector & build reputation for know-how & a practical approach to climate change & associated regulation.
Increased demand for existing products/services
Current Indirect (Client) Likely Low
2OPChanging consumer behaviour
Australia’s energy use is rising rapidly with demand forecast to grow by 14% over the next decade. The use of energy efficient assets will become increasingly important to minimise energy consumption & contain costs. Although take up of 'green' retail banking products remains low, the Australian Government’s Clean Energy Future (CEF) legislation & associated Carbon Price Mechanism have
Increased demand for existing products/services
Current Indirect (Client)
About as likely as not Low
ID
Opportunity driver
Description
Potential impact Timeframe
Direct/ Indirect
Likelihood
Magnitude of impact
driven interest in low carbon investment products from commercial, corporate, institutional & Government customers .
3OP Reputation
Employee engagement, attraction & retention. Related to reputation, sustainability performance (including an organisation's response to climate change) can influence employee engagement as well as attraction & retention of employees
Other: Greater access to talent Current Direct About as
likely as not Low
6.1f
Please describe (i) the potential financial implications of the opportunity; (ii) the methods you are using to manage this opportunity; (iii) the costs associated with these actions Reputation (1OP & 2OP) (i)Brand differentiation opportunities associated with climate change are evident through our retail banking business via customer & NGO correspondence & campaigning, & also apply across all business & institutional banking divisions as well as funds management, particularly amongst those sectors emerging to address climate changes issues. E.g. the finalisation of the Renewable Energy Target for Australia is estimated to require an additional $20b in investment in this emerging sector. In Australia, climate change is a high profile political topic & remains challenging for banks to play a constructive role in the debate while balancing sometimes competing customer interests. There is heightened scrutiny on the role of banks in supporting emerging clean energy or tech &/or high emitting industrial activities. This has included specific campaigns by Greenpeace with regards to the financing of new coal fired energy generation in 2010/11 & more recently campaigns by Market Forces on the financing of energy & ports projects within the Great Barrier Reef World Heritage site. (ii) The customer dimension is primarily managed through: • Ongoing engagement with a range of stakeholders including customers, NGOs, suppliers, the wider community, scientific community & industry associations, to understand the range of views & complexity of this issue • The development of a clear, consistent company position on the issue endorsed by the Board & ET. E.g. the Climate Change Position Statement which is available to stakeholders on our website; • Clear public objectives/commitments to the CleanTech & Environmental Services sector ($6 billion by 2017) & broader product development (one retail product or service to be launched each year to help customers manage their environmental impacts); • Promotion of the organisations positioning & performance internally through the intranet & externally through advertising & engagement with media & community groups; • Transparent reporting to manage and respond to stakeholder concerns; • Internal awareness, education & capacity building to enable employees to confidently speak with prospective customers on Westpac’s position and product offerings.
Similarly for employees, engagement & satisfaction metrics linked to the bank’s performance on sustainability & environmental factors & within the community are regularly tracked. These indicate that our sustainability approach is a reason why people are attracted to & stay with the organisation. Key to this is actively engaging on climate & other sustainability issues via an internal champions program known as OurTomorrow, started in NZ, expanded to Australia & rolled out in the Pacific region in Apr 2012. More than 2,500 employees are members of the program (iii)The major costs associated with the customer dimension of this approach are associated with research & engagement, training & development & sponsorship of conferences. These costs are in the order of AUD400k. Investment in the OurTomorrow program since commencement has been approx AUD180k. Changing consumer behaviour (3OP) (i) Linked to reputation issues is the opportunity that consumers will favour brands with strong environmental credentials & seek out specific climate change related products & services. In addition, this will lead to increased demand from those sectors emerging to address climate changes issues. E.g. more than 1 million households across Australia have already installed rooftop solar systems With the average household bill is $700 a year more than it was five years ago, householders cite concerns about the rising cost of energy as a major reason for investing in solar units. (ii) Key to understanding & maximising this opportunity is customer engagement to understand these market trends & to inform product development. Whilst this is primarily undertaken with institutional customers & supported by training for a wide range of employees & toolkits to help facilitate these discussions, rising energy prices are also increasing interests amongst small business & householders. The next step based on this information is the development of suitable products & services. To date this has included financing energy efficiency in the SME & property sectors, the provision of eco-friendly service delivery options (eg eStatements) & lending for bio-sequestration forestry projects. In response to interest from commercial, corporate, institutional & government customers Westpac subsidiary Ascalon Capital Managers, which has a 30% stake in Arkx Investment Management, released a retail investment product that offers exposure to the Arkx Clean Energy Fund allowing customers the opportunity to invest in low carbon investment options. In 2012, Westpac launched the Energy Efficient Lease, which applies standard lease features to energy efficient assets making it easier & more cost effective for large firms to reduce carbon emissions & cut energy costs. (iii) The main costs are product development & investment. E.g. Arkx’ total assets under management was AUD5.452m largely representing seed pool funding from Ascalon.
6.1g
Please explain why you do not consider your company to be exposed to opportunities driven by changes in regulation that have the potential to generate a substantive change in your business operations, revenue or expenditure
6.1h
Please explain why you do not consider your company to be exposed to opportunities driven by physical climate parameters that have the potential to generate a substantive change in your business operations, revenue or expenditure
6.1i
Please explain why you do not consider your company to be exposed to opportunities driven by changes in other climate-related developments that have the potential to generate a substantive change in your business operations, revenue or expenditure
Module: GHG Emissions Accounting, Energy and Fuel Use, and Trading [Investor]
Page: 7. Emissions Methodology
7.1
Please provide your base year and base year emissions (Scopes 1 and 2)
Base year
Scope 1 Base year emissions (metric tonnes
CO2e)
Scope 2 Base yearemissions (metric
tonnes CO2e)
Sun 01 Jul 2007 - Mon 30 Jun 2008
10823 188780
7.2
Please give the name of the standard, protocol or methodology you have used to collect activity data and calculate Scope 1 and Scope 2 emissions
Please select the published methodologies that you use
Australia - National Greenhouse and Energy Reporting Act New Zealand - Guidance for Voluntary, Corporate Greenhouse Gas Reporting
Please select the published methodologies that you use
Other
7.2a
If you have selected 'Other', please provide details below Certified Emissions Measurement and Reduction Scheme (CEMARS) New Zealand. WNZL has been using the CEMARS greenhouse gas emissions inventory for five years to certify the amount of GHG emissions that can be directly attributed to the organisation’s operations. It is based on the Greenhouse Gas Protocol: a Corporate Accounting and Reporting Standard (2004) and ISO 14064-1:2006 Specification with Guidance at the Organization Level for Quantification and Reporting of Greenhouse Gas Emissions and Removals.
7.3
Please give the source for the global warming potentials you have used
Please give the emissions factors you have applied and their origin; alternatively, please attach an Excel spreadsheet with this data
Fuel/Material/Energy
Emission Factor
Unit
Reference
Diesel/Gas oil 69.81 Other: kg CO2e per GJ NGER Natural gas 51.33 Other: kg CO2e per GJ NGER Motor gasoline 66.92 Other: kg CO2e per GJ NGER Other: Electricity – ACT & NSW 0.89 Other: kg CO2e per kWh NGER Other: Electricity – QLD 0.88 Other: kg CO2e per kWh NGER Other: Electricity – VIC 1.21 Other: kg CO2e per kWh NGER Other: Electricity – TAS 0.30 Other: kg CO2e per kWh NGER Other: Electricity – SA 0.68 Other: kg CO2e per kWh NGER Other: Electricity – WA 0.80 Other: kg CO2e per kWh NGER Other: Electricity – NT 0.67 Other: kg CO2e per kWh NGER Other: Building Refrigerants 1300.00 metric tonnes CO2e per metric tonne NGER Natural gas 0.00019 Other: kg CO2e per kWh CEMAR Other: Petrol - Regular 0.00235 kg CO2e per litre CEMAR Other: Petrol - Premium 0.00238 kg CO2e per litre CEMAR Diesel/Gas oil 0.00269 kg CO2e per litre CEMAR Other: Petrol <1350cc 0.00015 Other: kg CO2e per km CEMAR Other: Petrol >1600cc-2000cc 0.00024 Other: kg CO2e per km CEMAR Other: Petrol >3000cc 0.00031 Other: kg CO2e per km CEMAR Other: HCFC-22(R-22, Genetron 22 or Freon 22) 1.50000 Other: kg CO2e per kg CEMAR Other: R-407C 1.52550 Other: kg CO2e per kg CEMAR Electricity 0.00016 Other: kg CO2e per kWh CEMAR
Page: 8. Emissions Data - (1 Jul 2011 - 30 Jun 2012)
8.1
Please select the boundary you are using for your Scope 1 and 2 greenhouse gas inventory Operational control
8.2
Please provide your gross global Scope 1 emissions figures in metric tonnes CO2e 12134
8.3
Please provide your gross global Scope 2 emissions figures in metric tonnes CO2e 176648
8.4
Are there are any sources (e.g. facilities, specific GHGs, activities, geographies, etc.) of Scope 1 and Scope 2 emissions which are not included in your disclosure? Yes
8.4a
Please complete the table
Source
Scope
Explain why the source is excluded
Asia & US sites Scope 1 and 2 Sites are not currently deemed to be material in size
Incidentals e.g. fire supressants & lawn mower fuel Scope 1 Sources are not currently deemed to be of a material size in line with NGERS requirements
Sites outside WBC's operational control e.g. residences, InStores, sub-leased or licensed facilities & novated leases
Scope 1 and 2 Sites are outside WBC's operational control
8.5
Please estimate the level of uncertainty of the total gross global Scope 1 and 2 emissions figures that you have supplied and specify the sources of uncertainty in your data gathering, handling and calculations
Scope 1 emissions: Uncertainty
range
Scope 1
emissions: Main sources of uncertainty
Scope 1 emissions: Please expand on
the uncertainty in your data
Scope 2
emissions: Uncertainty
range
Scope 2 emissions:
Main sources of uncertainty
Scope 2 emissions: Please expand on
the uncertainty in your data
More than 2% but less than or equal to 5%
Assumptions Extrapolation Metering/ Measurement Constraints Sampling Data Management
Assumptions 1. All fuel purchased is captured by accounts and correctly coded 2. Invoices from energy provider are an accurate reflection of fuel used. 3. A site audit of all Westpac owned HVAC systems in New Zealand has been undertaken. A default leakage rate is included in the refrigerant calculations. 4. It is assumed that all NZ rental car hire was booked through the travel provider and distance travelled was recorded for all vehicles. Emission factors were based on engine size/distance travelled.
More than 2% but less than or equal to 5%
Data Gaps Assumptions Extrapolation Metering/ Measurement Constraints Sampling
1. Australian ATMs. Invoices from energy providers are assumed to be an accurate reflection of consumption. For unmetered ATMs where no data exists, electricity use is estimated based on averages for metered ATM types (ie Free standing or through the wall ATMs). 2. Australia and New Zealand invoices from energy providers are assumed to be an accurate reflection of consumption. Where site data is not available a kWh/m2 is applied based on state averages for that building type. Where consumption data is not provided in time for year end an average is applied based on historical use.
8.6
Please indicate the verification/assurance status that applies to your Scope 1 emissions Third party verification or assurance complete
8.6a
Please indicate the proportion of your Scope 1 emissions that are verified/assured More than 90% but less than or equal to 100%
8.6b
Please provide further details of the verification/assurance undertaken, and attach the relevant statements
Type of verification or
assurance
Relevant standard
Attach the document
Limited assurance Australian national GHG emission regulation (NGER)
Please provide further details of the regulatory regime to which you are complying that specifies the use of Continuous Emissions Monitoring Systems (CEMS)
Regulation % of emissions covered by the system Compliance period
Evidence of submission
8.7
Please indicate the verification/assurance status that applies to your Scope 2 emissions Third party verification or assurance complete
8.7a
Please indicate the proportion of your Scope 2 emissions that are verified/assured More than 90% but less than or equal to 100%
8.7b
Please provide further details of the verification/assurance undertaken, and attach the relevant statements
Type of verification or
assurance
Relevant standard
Attach the document
Limited assurance Other: Australian national GHG emission regulation (NGER)
Do you have Scope 2 emissions sources in more than one country? Yes
10.1a
Please complete the table below
Country/Region
Scope 2 metric tonnes CO2e
Purchased and consumed electricity, heat, steam or cooling (MWh)
Purchased and consumed low carbon electricity, heat, steam or cooling (MWh)
Australia 170500 191979 0 New Zealand 3731 24095 0 Rest of world 2417 8814 0
10.2
Please indicate which other Scope 2 emissions breakdowns you are able to provide (tick all that apply) By business division
10.2a
Please break down your total gross global Scope 2 emissions by business division
Business division
Scope 2 emissions (metric tonnes CO2e)
Westpac Australia 115710 St. George Banking Group 53471 Property Trusts 259 Australian Subsidiaries 1059 Westpac New Zealand 3731 Westpac Pacific 1945 Westpac United Kingdom 472
10.2b
Please break down your total gross global Scope 2 emissions by facility
Facility
Scope 2 emissions (metric tonnes CO2e)
10.2c
Please break down your total gross global Scope 2 emissions by activity
Activity
Scope 2 emissions (metric tonnes CO2e)
10.2d
Please break down your total gross global Scope 2 emissions by legal structure
Legal structure
Scope 2 emissions (metric tonnes CO2e)
Page: 11. Energy
11.1
What percentage of your total operational spend in the reporting year was on energy? More than 0% but less than or equal to 5%
11.2
Please state how much fuel, electricity, heat, steam, and cooling in MWh your organization has purchased and consumed during the reporting year
Please complete the table by breaking down the total 'Fuel' figure entered above by fuel type
Fuels
MWh
Diesel/Gas oil 3748 Motor gasoline 22090 Natural gas 4385 Liquefied petroleum gas (LPG) 34
11.4
Please provide details of the electricity, heat, steam or cooling amounts that were accounted at a low carbon emission factor Basis for applying a low carbon
emission factor
MWh associated with low carbon electricity, heat, steam or cooling
Comments
Supplier specific, not backed by instruments 112 Although GreenPower was purchased during the reporting period it was not
included as an emissions reduction.
Further Information
Question 11.3 only refers to energy consumed by Australia operations which represents 84% of energy consumed by the Group. This is due to the differing data management procedures across the Group.
Page: 12. Emissions Performance
12.1
How do your absolute emissions (Scope 1 and 2 combined) for the reporting year compare to the previous year? Decreased
12.1a
Please complete the table
Reason
Emissions value (percentage)
Direction of change
Comment
Emissions reduction activities 6 Decrease Energy efficiency projects completed during the reporting year Divestment 0 No divestment during the reporting year Acquisitions 0 No acquisitions during the reporting year Mergers 0 No mergers during the reporting year Change in output 3 Increase Expansion and intensification of data centres during the reporting year
Change in methodology 0.2 Increase Refrigerants from Australian operations included in absolute emissions for the first time in this reporting year
Change in boundary 1 Increase Increased coverage over Pacific operations Change in physical operating conditions 0 No change in physical operating conditions during the reporting year
Unidentified 0 No unidentified changes in emissions during the reporting year Other 0 No other changes in emissions during the reporting year
12.2
Please describe your gross combined Scope 1 and 2 emissions for the reporting year in metric tonnes CO2e per unit currency total revenue
Intensity figure
Metric numerator
Metric denominator
% change from
previous year
Direction of change
from previous
year
Reason for change
10.5 metric tonnes CO2e
unit total revenue 10.6 Decrease
Total revenue in a banking context is regarded to be the sum of net interest income and non-interest income or total operating income before operating expenses and impairment charges. As WBC has a 30 September year-end for financial data and a 30 June year-end for environmental data, the intensity figure is total revenue as at 30 September 2012 divided by gross global combined Scope 1 and 2 emissions in metric tonnes CO2e as at 30 June 2012. The decrease from 11.75 to 10.50 between 2011 and 2012 can be attributed to a decrease in Scope 1 and 2 emissions as a result of emission reduction activities including emission abatement projects increasing the efficiency of operations.
12.3
Please describe your gross combined Scope 1 and 2 emissions for the reporting year in metric tonnes CO2e per full time equivalent (FTE) employee
Intensity figure
Metric numerator
Metric denominator
% change from
previous year
Direction of change
from previous
year
Reason for change
5.29 metric tonnes CO2e
FTE employee 10.8 Decrease
As WBC has a 30 September year-end for financial data and a 30 June year-end for environmental data, the intensity figure is full time equivalent staff as at 30 September 2012 divided by gross global combined Scope 1 and 2 emissions in metric tonnes CO2e as at 30 June 2012. The decrease from 5.93 to 5.29 between 2011 and 2012 can be attributed to a decrease in Scope 1 and 2 emissions as a result of emission reduction activities including emission abatement projects increasing the efficiency of operations.
12.4
Please provide an additional intensity (normalized) metric that is appropriate to your business operations
Intensity figure
Metric numerator
Metric denominator
% change from
previous year
Direction of change from previous year
Reason for change
0.20 metric tonnes CO2e
square meter 1.95 Decrease
The decrease from 0.2034 to 0.1995 between 2011 and 2012 can be attributed to a decrease in Scope 1 and 2 emissions as a result of emission reduction activities including emission abatement projects increasing the efficiency of operations and sites being added to portfolio increasing the overall square meterage.
Page: 13. Emissions Trading
13.1
Do you participate in any emissions trading schemes? No, and we do not currently anticipate doing so in the next 2 years
13.1a
Please complete the following table for each of the emission trading schemes in which you participate
Scheme name
Period for which data is supplied
Allowances allocated
Allowances purchased
Verified emissions in metric tonnes CO2e
Details of ownership
13.1b
What is your strategy for complying with the schemes in which you participate or anticipate participating?
13.2
Has your company originated any project-based carbon credits or purchased any within the reporting period? Yes
13.2a
Please complete the table
Credit origination or
credit purchase
Project type
Project identification
Verified to which standard
Number of credits (metric
tonnes of CO2e)
Number of credits (metric tonnes CO2e):
Risk adjusted volume
Credits retired
Purpose, e.g. compliance
Credit Purchase
Other: Various Confidential CDM (Clean Development
Mechanism) Not relevant
Other: To facilitate market making in EU, NZ & Aust carbon markets.
Credit Purchase
Other: Various Confidential JI (Joint Implementation)
Not relevant
Other: To facilitate market making in EU, NZ & Aust carbon markets.
Credit Purchase
Other: Various Confidential
Other: Australian compliance credit under Carbon Farmining Initiative
Not relevant
Other: To facilitate market making in Aust carbon market.
Credit Purchase
Other: Various Confidential Other: NZ compliance credit
Please account for your organization's Scope 3 emissions, disclosing and explaining any exclusions
Sources of Scope 3
emissions
Evaluation status
metric tonnes CO2e
Methodology
Percentage of
emissions calculated
using primary
data
Explanation
Purchased goods and services
Not relevant, explanation provided Not applicable
Emissions from extraction, production and transportation of purchased goods and services have been excluded from our inventory due to both the accuracy of the data and the materiality of the emissions source in the context of a service organisation.
Capital goods Not relevant, explanation provided Not applicable
Emissions from extraction, production, and transportation of purchased capital goods have been excluded from our inventory due to both the accuracy of the data and the materiality of
Sources of Scope 3
emissions
Evaluation status
metric tonnes CO2e
Methodology
Percentage of
emissions calculated
using primary
data
Explanation
the emissions source in the context of a service organisation.
Fuel-and-energy-related activities (not included in Scope 1 or 2)
Relevant, calculated 30772
Extraction, production, and transport of purchased fuels and energy is accounted for in transmission losses and fleet (Scope 3 emissions). Emissions from transmission losses and fleet are calculated through application of the NGA emission factors in Australia and CEMARS in NZ.
59% Not applicable
Upstream transportation and distribution
Not relevant, explanation provided Not applicable
Emissions from transportation and distribution of purchased products and services have been excluded from our inventory due to both the accuracy of the data and the materiality of the emissions source in the context of a service organisation.
Waste generated in operations
Relevant, calculated 9475
Disposal and treatment of waste generated is accounted for in waste to landfill and paper waste. Waste to landfill data only includes commercial offices. Excludes data centres, retail, stand-alone ATMs, fleet and sites where WBC does not have operational control or there are issues with data completeness. Emissions from waste to landfill are calculated through application of NGA factors in Australia. Due to a lack of waste data in NZ a generic carboNZero programme office emission factor is applied. This is based on an estimate of food waste and paper waste sent to landfill by each FTE. Paper waste data is calculated as paper purchased, including book products, less recycled paper, including office and archive recycling. Emissions from paper waste are calculated through application of NGA emission factors in Australia and CEMARS in NZ.
18% Not applicable
Sources of Scope 3
emissions
Evaluation status
metric tonnes CO2e
Methodology
Percentage of
emissions calculated
using primary
data
Explanation
Business travel Relevant, calculated 11613
In line with the WBC travel policy, the class of travel for domestic and international flights less than five hours is economy and the class of travel for international flights greater than five hours is business. However, when calculating emissions from business travel, domestic flights are considered to be all internal and trans-Tasman flights. Emissions from business travel are calculated through application of the NGA and GHG Protocol emission factors in Australia and the UK, and CEMARS emission factors in NZ.
23% Not applicable
Employee commuting
Not relevant, explanation provided Not applicable
Emissions from transportation of employees between their homes and WBC in vehicles not owned or operated by WBC is excluded from our inventory due to both the accuracy of the data and WBC’s ability to influence transport infrastructure in the city locations where most corporate offices are located. However, WBC does promote local employment practices for reasons including reducing employee commuting.
Upstream leased assets
Relevant, calculated 0
Operation of assets leased by WBC is accounted for in base building emissions. Emissions from base building are calculated through application of the NGA emission factors in Australia.
0% Not applicable
Investments Not relevant, explanation provided Not applicable
Due to the completeness, transparency and accuracy of emissions from investments have been excluded from our public inventory. However, there are policies and customer engagement strategies in place to proactively minimise these risks.
Downstream Not relevant, Not applicable Emissions from transportation and distribution of
Sources of Scope 3
emissions
Evaluation status
metric tonnes CO2e
Methodology
Percentage of
emissions calculated
using primary
data
Explanation
transportation and distribution
explanation provided
WBC's products have been excluded from our inventory due to the materiality of the emissions source in the context of a service organisation.
Processing of sold products
Not relevant, explanation provided Not applicable
Emissions from processing of intermediate products sold by downstream companies have been excluded from our inventory due to the materiality of the emissions source in the context of a service organisation.
Use of sold products
Not relevant, explanation provided Not applicable
Emissions form end use of sold goods and services have been excluded from our inventory due to the materiality of the emissions source in the context of a service organisation.
End of life treatment of sold products
Not relevant, explanation provided Not applicable
Emissions from waste disposal and treatment of sold products at the end of their life have been excluded from our inventory due to the materiality of the emissions source in the context of a service organisation.
Downstream leased assets
Not relevant, explanation provided Not applicable
Emissions from operation of assets leased to other entities have been excluded from our inventory due to both the accuracy of the data and the materiality of the emissions source in the context of a service organisation.
Franchises Not relevant, explanation provided Not applicable
Emissions from operation of franchises have been excluded from our inventory as franchises are excluded from our operational control and reporting is not required under local mandatory and voluntary frameworks.
Other (upstream) Not relevant, explanation provided Not applicable
No other (upstream) Scope 3 emissions sources have been identified.
Other (downstream)
Not relevant, explanation provided Not applicable
No other (downstream) Scope 3 emissions sources have been identified.
14.2
Please indicate the verification/assurance status that applies to your Scope 3 emissions Third party verification or assurance complete
14.2a
Please indicate the proportion of your Scope 3 emissions that are verified/assured More than 90% but less than or equal to 100%
14.2b
Please provide further details of the verification/assurance undertaken, and attach the relevant statements
Are you able to compare your Scope 3 emissions for the reporting year with those for the previous year for any sources? Yes
14.3a
Please complete the table
Sources of Scope 3 emissions
Reason for change
Emissions value (percentage)
Direction of
change
Comment
Fuel- and energy-related activities (not included in Scopes 1 or 2)
Emissions reduction activities
1 Decrease Decrease due to energy efficiency projects completed during the reporting year.
Waste generated in operations Change in boundary 2 Increase Increase due to increased data coverage during the reporting
year.
Business travel Emissions reduction activities
7 Decrease Decrease due to the ongoing monthly review of on-line spend reports for travel at executive meetings with actions taken to reduce travel.
Upstream leased assets Change in boundary 5 Decrease Decrease due to the sale of the company that owned Westpac
Place base building during the reporting year.
14.4
Do you engage with any of the elements of your value chain on GHG emissions and climate change strategies? (Tick all that apply) Yes, our suppliers
14.4a
Please give details of methods of engagement, yourstrategy for prioritizing engagements and measures of success Westpac’s Group-wide environmental management reporting is prepared to ensure we can measure and target sustainability initiatives, including reducing our carbon footprint. Information and data collected is subject to validation (especially from third party suppliers) and controls. Providing reliable/auditable environmental reporting data is a requirement of Westpac tenders with commodities that we are currently including within our Scope 1, 2 and 3 reporting. These selected providers are contractually obliged to report this information on a regular basis. Confirmation of data accuracy from suppliers is achieved in three ways: 1. Discussing with suppliers the details of submitted reports (including answering Westpac queries on the data submitted) 2. Provision of “Confirmation/Attestation” letters to Westpac by suppliers. 3. Third party checks on suppliers submitted data This data is then reviewed and consolidated and subject to internal validation to ensure the integrity and completeness of the information. Westpac began reporting environmental data from suppliers in 2001. Since this time, we encountered challenges in obtaining complete and accurate emissions data from our suppliers who were at varying stages of maturity in their reporting. Over the years, Westpac has held sessions with our suppliers with whom we are reporting emissions on ranging from one to ones, forums, information sharing sessions, discussions including auditors in order to facilitate improvements in the data reported by many suppliers, and we look to continue to offer more education and guidance for those suppliers who need support in completing their reporting in the future (in particular our hotel suppliers). For categories that are managed by the sourcing team, as tenders commence, sustainability requirements are also included which instigate further discussions/negotiations with the suppliers. In 2001, our supplier emissions reporting was not as sophisticated as it is today, with only car fleet and paper emissions reported in our annual report. Today we are reporting on a number of additional indicators (nine) which our suppliers provide us. This is an indication of our success in working with our suppliers and driving the market since 2001 when we were one of the first companies to request emission based data from suppliers. We look to continue to add to our performance reporting framework.
14.4b
To give a sense of scale of this engagement, please give the number of suppliers with whom you are engaging and the proportion of your total spend that they represent
Number of suppliers
% of total
spend Comment
31 6% Westpac’s 12 month spend on suppliers was $3.7bn as at 30 June 2012. Environmental data collected through WBC's supply chain management processes represents almost 100% of the emissions reported in the environmental factpac (attached).
14.4c
If you have data on your suppliers' GHG emissions and climate change strategies, please explain how you make use of that data How you make use
of the data
Please give details
We do not have any data
We are currently updating our sustainable supply chain management framework and our updated assessment process for suppliers will require additional information from our suppliers regarding GHG emissions and climate change strategies.
14.4d
Please explain why not and any plans you have to develop an engagement strategy in the future
Please enter the name of the individual that has signed off (approved) the response and their job title Siobhan Toohill Head of Group Sustainability & Community Corporate Affairs & Sustainability
