Banks face scrutiny over deforestation exposure

Australia's major banks are facing renewed scrutiny over their exposure to deforestation, with new analysis from the Australian Conservation Foundation (ACF) linking mortgages held by lenders to more than 16,500 hectares of forest clearing.

ACF's latest report identified 82 cases of deforestation linked to major Australian banks during the last financial year, with 99% of the affected land associated with agriculture.

NAB had the largest exposure identified, linked to 5813 hectares across 25 cases, followed by Commonwealth Bank (CBA) with 3105 hectares and ANZ with 2449 hectares. Westpac, Rabobank and Bendigo Bank were also identified.

The analysis found 94% of cases occurred in New South Wales or Queensland, with clearing affecting habitats for threatened species including koalas, greater gliders and glossy black cockatoos.

ACF estimated the clearing generated more than 11 million tonnes of carbon dioxide-equivalent emissions, which it said were largely absent from banks' climate reporting.

ACF policy analyst corporate responsibility Max Hamra said deforestation presented risk beyond biodiversity, particularly for agriculture.

"Deforestation poses significant risks to Australia's economy, especially agribusinesses," Hamra said.

"Farmers are on the frontline of extreme weather and the damage to soil health and the water cycle that occurs when forests are bulldozed."

ACF said 32 of the 82 cases had been reported to authorities over potential breaches of federal or state laws.

The findings come as banks face increasing pressure from shareholders over nature related risks. CBA shareholders will vote on October 14 on a resolution calling for disclosure of steps the bank will take to become deforestation-free.

ANZ also faces new shareholder resolutions after investors backed a resolution last year calling for greater disclosure of its exposure to deforestation.

Hamra said banks had an opportunity to play a greater role in preventing environmental damage through lending decisions and ongoing monitoring.

"Banks have a significant role to play in ending deforestation in Australia," Hamra said.

ACF said to address the issue could exposure banks to risks affected agricultural productivity, borrowers and the value of assets underpinning lending portfolios.