Westpac sets zero-deforestation target for livestock farm lending

In an industry first that is expected to prompt other banks to take action, Westpac will not lend to beef, dairy and sheep farms if they are engaged in land clearing.

In its Natural Capital Position statement, released Monday, the bank affirmed its commitment to the Net Zero Banking Alliance 2030 target for agriculture, specifically dairy, beef and sheep.

"Those targets included a commitment to no deforestation, which provides for no further conversion of natural forest to agricultural land use within farm systems from 31 December 2025," the statement said. The policy would apply to any customer with loans over $1.5 million.

In a press release, The Australian Conservation Foundation said it expected Westpac’s decision to adopt a zero-deforestation policy for beef, dairy and sheep farming to "drive a wave of zero-deforestation commitments across Australia’s banking sector”.

As part of its net zero commitments, the bank also stated it would "support" customers and work with industry groups to drive a 10% reduction in land management emissions for the dairy industry and a 9% reduction in land management emissions from beef and sheep producers by 2030 against a 2021 baseline.

"Agribusiness plays a fundamental role in providing food and other essential goods, driving economic prosperity and supporting livelihoods and communities," according to Westpac's 2023 Climate Change Position Statement and Action Plan.

"Climate change physical risks are increasingly material to agribusinesses. We recognise the ability to adapt to a changing climate is vital, not just for agribusiness customers, but for society as a whole."

The bank said it would provide access to products and services that support climate adaptation and resilience, as well as support customers affected by drought and natural disasters.

Nature Positive Bank

The Natural Capital Position Statement affirms Westpac's "ambition to become a nature-positive bank".

Among the principles it identifies in achieving that ambition;

• Nature and climate change are interdependent 

• Economic prosperity and improved stocks of natural capital are complementary

• Addressing natural capital loss creates opportunities, and

• Nature-related risk is a financial risk

The bank also said it would increase its emphasis on so-called 'natural capital' financing. It will also investigate critical habitat loss in terms of impact to the business and work with borrowers to reduce any impact.

Westpac is adopting the policies and definitions for deforestation as provided by The Accountability Framework Initiative, a global watchdog comprised on environmental groups such as WWF, the Rainforest Alliance, and the Nature Conservancy.

It has on its advisory committee executives from McDonald's, PepsiCo and European Feed Manufacturers’ Federation.

The Accountability Framework calls for no net deforestation, and Westpac said it would work with customers "to achieve a balance between deforestation and restoration of natural forests, with the aim of seeing the area of natural forested land remain stable or increase over time".

"While we ultimately want to see no clearing of individual forests... we aim to work with customers to balance these impacts via conservation or reforestation initiatives," the statement said.

The statement was released on the same day as Westpac announced an annual net profit for the 2023 financial year of $7.2 billion, up 26% year on year.