An interview with Mark Joiner
I’m with Mark Joiner, the Executive Director Finance with the NAB and we are talking about Australia’s transition to a clean energy economy. Mark, how is the NAB preparing for the transition to a carbon constrained economy?
At NAB, we’re working on a number of fronts to prepare for a carbon constrained economy. We’re investing to reduce our own carbon footprint and are on track to achieve our carbon neutral 2010 commitment. We’re supporting our people to lead healthier lives and reduce their impact at work and at home. We’re providing advice as well as new products and services to our customers to help them develop their response. And we’re building partnerships with a range of stakeholders, particularly our suppliers. All of this is underpinned by a drive to deepen our understanding of the risks and opportunities presented by a carbon constrained economy.
The carbon constrained economy is a challenge, but it is also, by the sounds of it, an opportunity?
Transitioning to a carbon constrained economy does present challenges for business but the opportunities are significant. New industries are emerging, which creates jobs and marketplace opportunities including investment in renewable technologies. On the other hand some industries will depart, simply because they are not sustainable and able to perform in a carbon constrained economy. The key is to view change through a positive lens and grow the economy while reducing emissions.
What do you see as the biggest opportunities for large, medium and small business?
One of the biggest opportunities is to start managing your own carbon footprint. As well as being the right thing to do, the first movers will have a competitive advantage as carbon becomes more of a measurable metric with associated costs and benefits. Little things like efficient lighting, appliances and computer software are moving NAB in the right direction and bringing our costs down which supports overall profitability.
The transition to a low carbon economy also means developing new markets and new products and services which will have a stimulatory impact on the economy and create green jobs.
But what about risks? There must be risks for business.
Yes, there are considerable risks.
Firstly there is regulatory risk. Currently there is considerable uncertainty and what business needs from Government are clear, long term regulatory settings. This is the key to effectively mobilise capital for investment in clean energy and emissions reduction.
We are also facing financial risks from expected increases in prices of fuel and energy as well as carbon. On top of this, banks may experience credit risk if customers do not prepare for and manage the impact of new compliance requirements and emissions trading schemes.
And then there are the very real physical risks associated with climate change which include rising sea levels, changes in rainfall patterns and the frequency of severe weather events. These challenge us all.
The Renewable Energy Target legislation is expected to generate $20 billion worth of investment in the clean energy sector. How do you see the NAB, the bank, participating in that energy surge?
We are keen to encourage and promote investment in renewables amongst our customer base however the technology has to be commercial and scalable. We have a dedicated team working hard to keep abreast of clean energy developments and they are open to ideas and opportunities. While we won’t bank every idea, certain technologies will dominate and we plan to be part of their development.
In the end our lending and portfolio management thinking will be guided by risk management and good business practice.
So do you see a good business case for particular sectors of the clean energy industry? Or is it more on a project by project basis that you will evaluate things?
The Renewable Energy Target legislation will build a strong business case for investment in the renewable energy sector as a whole. But in the end, lending decisions are often a project by project proposition. This is particularly true for limited recourse financings, which are often favoured by project developers.
We have talked about the new technologies and the investment you might make in that. What about the investment banking areas of the bank. Do you think that you will be a participant in the carbon trading markets for example?
We are very interested in the potential of carbon trading markets, particularly for our wholesale bank to help market participants manage their carbon exposures. We are doing a lot of work to better understand the needs of large emitters, and to bring the knowledge we have gained in Europe to the Australian market.
Is the NAB doing anything to foster the development of the clean energy industry through their lending and investment decisions?
NAB has been providing project finance to the Australian clean energy sector since 2004. We are now one of the leading providers of finance to the clean energy sector in Australia, having financed around 1350 MW of projects, which includes around 350 MW offshore.
The majority of our exposure is to wind, landfill gas, biomass, and coal mine methane – and we’re continuing to look for opportunities with other technologies.
As part of our carbon neutral 2010 commitment we are also investigating a range of offshore investments which include clean energy projects that can generate offsets to help reduce our carbon footprint.
What is NAB’s view on the renewable energy potential of Australia?
Australia has strong clean energy potential, provided the right policy settings are put in place. We’re in a fortunate position because of our access to abundant renewable energy resources like solar, wind, tidal and geothermal.
What is NAB’s view of the linking of the CPRS-RET legislation?
As a bank, we’re keen to see the political process surrounding CPRS and RET resolved rapidly. Legislative uncertainty is a brake on investment in these areas.
How has NAB progressed in embedding the Equator Principles into its project finance lending practices?
We signed up to the Equator Principles in 2007 and have embedded the principles into our credit policy and procedures. Our performance against these principles is captured in our annual Corporate Responsibility reporting.