Australian Ethical looks to pressure Westpac on ESG

Mike Taylor

Managing Editor/Publisher, Financial Newswire

15 December 2025

Australian Ethical has accused Westpac of no longer being a climate frontrunner among the big four banks.

The fund manager pointed to Westpac having weakened its approach and said it is therefore urging the big banking group to restore its commitment to the Paris-aligned climate lending standards.

In a statement, Australian Ethical said Westpac previously committed to only provide new or renewed corporate lending to oil and gas companies with credible transition plans aligned with the Paris Agreement, including Scope 1, 2, and 3 emissions.

“However, in its latest sustainability disclosures, the bank has:

• Dropped the requirement for Scope 3 targets, replacing it with vague “ambition” to reach net zero by 2050
• Changed its global warming target from 1.5C to “well below 2C,” loosening its climate stance
• Rated 91% of its oil and gas customers as having acceptable transition plans, despite continued fossil fuel expansion

“These changes mean Westpac can continue financing companies engaged in unsustainable fossil fuel expansion – contrary to its previous commitments,” Australian Ethical said.

“Westpac is no longer the climate frontrunner among the big four banks. This year’s reporting suite shows that it has now slipped behind Commonwealth and National Australia Bank by stepping back from its own climate promises,” Ethical Stewardship Lead Australian Ethical, Amanda Richman, said.

She noted that investor pressure on the banks’ financing of fossil fuels has been mounting for years, culminating in a record 34% vote at last year’s Westpac AGM in favour of a resolution co-filed by Australian Ethical calling for Westpac to clarify how it will assess client transition plans. This strategic stewardship has focused on cutting off financing for unsustainable fossil fuel expansion.

“Recently, Australian Ethical withdrew its shareholder resolution with NAB after securing stronger commitments.

“When you are looking at the transition plans of an oil and gas company, the obvious question to consider is are they expanding or opening new oil and gas fields, and if so, is that aligned with an orderly transition.

“Westpac’s new ‘customer transition action plan’ includes requirements around scope 3 emissions, but the bank has said it isn’t a guard rail that’s applied in practice.

“In short this means an oil and gas company now need only have scope 1 and 2 emission reduction targets to receive new or renewed financing from Westpac. This is inconsistent with Westpac’s original commitment,” Richman said.

She said major banks’ climate policies are critical leverage points because they help to dictate the cost of capital for fossil fuel producers. Westpac’s retreat sends the wrong signal at a time when climate action is needed.