The super fund has said Westpac weakened key climate safeguards, allowing fossil fuel expansion despite earlier Paris-aligned lending commitments.
Australian Ethical Investment has urged major bank Westpac to reinstate its Paris-aligned lending commitments after the bank weakened its approach to assessing oil and gas clients’ transition plans.
The firm said Westpac’s reversal risked enabling unsustainable fossil fuel expansion and undermining years of investor pressure for stronger climate action.
Westpac had 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, the fund stated.
Australian Ethical said the bank’s latest sustainability disclosures showed it had dropped the requirement for Scope 3 targets and replaced it with an ‘ambition’ to reach net zero by 2050.
It also changed its global warming target from 1.5C to “well below 2C”, loosening its climate stance.
The bank additionally rated 91 per cent 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,” the firm said.
Ethical stewardship lead at Australian Ethical, Amanda Richman, said Westpac had “slipped behind Commonwealth [CBA] and National Australia Bank [NAB] by stepping back from its own climate promises”.
Investor pressure on banks’ fossil fuel financing had intensified in recent years, culminating in a record 34 per cent vote at last year’s Westpac AGM supporting a resolution co-filed by Australian Ethical.
The stewardship push has focused on cutting off financing for unsustainable fossil fuel expansion.
Australian Ethical recently 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,” Richman said.
She said Westpac’s new “customer transition action plan” included requirements around Scope 3 emissions, but the bank had said it was not a guard rail 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,” she said.
Australian Ethical said major banks’ climate policies remained critical leverage points because they determined the cost of capital for fossil fuel producers.
The firm said Westpac’s retreat sent the wrong signal at a time when climate action was needed.
For more than a decade, Australian Ethical had engaged with banks on aligning lending with the Paris Agreement. It said CBA and NAB had made progress, while ANZ and Westpac were failing to meet their climate commitments.
In 2024, Australian Ethical’s shareholder resolution with Westpac received 34 per cent support, ranking in the top five globally for climate-themed resolutions tracked by the UN PRI database as at July 2025.
A climate resolution co-filed at Macquarie earlier this year received 35 per cent investor support.
In November 2025, Australian Ethical held 5.5 million Westpac shares.
