THE Australian economy faced dire consequences if banks and insurers continued to turn away from coal and other mining exports because of campaigns by environmental activists, various coal companies and associations have told a federal parliamentary inquiry into the subject.
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Submissions to the inquiry show the impact is most heavily felt in the Hunter, with exports through the Port of Newcastle (PoN) accounting for about 85 per cent of Australia's thermal coal exports, worth about $20 billion a year in total.
The inquiry held the first of three scheduled public hearings on Friday and the coal industry's concerns are laid out in a dozen of the 68 submissions received by the standing committee on trade and investment growth.
Representative body the Minerals Council of Australia says the mining sector has been the target of "an increasingly sophisticated campaign to disrupt investment flows" that began with thermal coal before "broadening its focus to include metallurgical coal and natural gas".
The council says that together with a "heightened focus on ESG (environmental, social and governance) issues, banks and insurers were increasingly reluctant to support the resources sector.
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This campaign impacted on the many smaller companies involved in mining and minerals exports as well as the big directly targeted majors and the council said "many companies" were reluctant to publicly take part in the inquiry as a result.
The bulk of the Hunter industry have lodged submissions: loader operator PWCS, Bloomfield Group, Centennial, Yancoal, Whitehaven and New Hope Group (Bengalla) have all - along with the Minerals Council of NSW - complained about the impact on the industry.
Many of the submissions accept there is an "energy transition" under way but say it will take decades not years.
Bloomfield, for example, listed more than a dozen major insurers - including Allianz, Chubb, QBE, CGU, Vero, AXA, Swiss Re and "certain Lloyds syndicates" - it "understood" had withdrawn from insuring coal mines in the past three years.
Financiers demand insurance before they will lend and Bloomfield says the difficulties meant that the cost of policies with the remaining insurers had more than doubled since 2016, with the excess (the amount it must contribute to any claim) on its "industrial special risks" policy now 10 times what it was in 2017.
Bloomfield said the reluctance to lend, driven by "shareholder activism", extended to finance guarantees of the company's rehabilitation obligations.
It said the credit squeeze significantly increased the cost of business because "prudence dictates that vastly increased cash must be retained within the business to cover uninsurable property risks, to fund the refreshment of mining fleets and expansion plans, and to guard against the prospect of bank guarantees and insurance bonds being unobtainable".
Washington H. Soul Pattinson spin-off New Hope, which runs the Bengalla mine at Muswellbrook, said the NSW government held $3.3 billion in mine site rehabilitation bonds, most of which were by way of bank guarantees or insurance bonds rather than cash deposits.
"If the financial institutions continue on their current course of rejecting the business of coal companies, the consequences will be dire," New Hope said.
It will be critical to our future prosperity that financial institutions limit investment in polluting and harmful industries including fossil fuels, and instead invest substantially in efforts to combat climate change and transition to renewable energy
- 350 Australia submission to the inquiry
It said the cost of doing business in Australia was "already becoming prohibitive".
It and the other coal companies said thermal coal would continue to be in demand for decades to come.
"The value of our coal exports ... can not be underestimated and should not be put at risk through the anti-competitive actions of our financial institutions and the misguided objections of a vocal minority," New Hope said.
Whitehaven, owner of the Narrabri mine Maules Creek and various Gunnedah operations also exporting through Newcastle, said the big four banks were "running ahead of the government on climate policy, putting national economic security and jobs at risk".
It argues that banks and super funds have defined fiduciary duties and that they had no mandate for "seeking to shape the emissions reduction policies of sovereign nations and other such market interventions".
The loss of big four bank lending would inevitably drive the industry to seek "alternative" funding, which was always higher cost and not always reliable.
On the back of its "first hand" difficulties in getting finance, Whitehaven wants more "transparency" on banking decisions it believes are driven by "vocal activist groups".
It wants the "full regulatory impact of bank policies on regional Australia" and says banks should be forced to prepare some form of "impact statement" if they intend to withdraw from resources funding.
Whitehaven also notes the "substantial benefit and commercial advantage" the major banks enjoy through their "government guarantee" and says it should be linked to their willingness to support "our export industries".
The growing trend within the finance sector to refuse to provide services to companies that produce thermal coal or other fossil fuels is inconsistent with the principle that emissions should be accounted for when they are generated by the end user of a product . . . and succumbs to an alarmist agenda promoted by activists
- Yancoal submission
Banking peak body the Australian Banking Association said climate considerations were an emerging risk, internationally, for banks, especially as governments began to include "net zero emissions" targets into policies and laws.
The association said "climate risk" was now an inherent part of the investment world.
Despite these pressures, it claimed that "exporting businesses face many challenges, but access to finance is not key among them".
The National Australia Bank addressed the climate risks head on, saying that while other Asian countries were buying the Australian thermal coal banned by China, the outlook for thermal coal was "uncertain" as growing numbers of countries pledged "net zero" positions.
It acknowledged that the ESG performance of the companies it lent to affected their "credit risk profile".
"While some customers are well-progressed in their low-carbon transition plans, others are just starting the process," the bank said.
As an example of its coal lending it pointed to "sustainability-linked loans" (SLL) with the privatised Port of Newcastle (PoN), which it said aligned its financing with better ESG outcomes.
The NAB move appears to follow ANZ's February decision to withdraw finance from the port, which was noted in a number of submissions.
PoN said late yesterday it had finished its financing with a range of lenders domestically and internationally.
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