How we manage risk

Learn about our approach to managing environmental, social and governance risk.

Responsible lending

Our customer-related ESG risk policies incorporate consideration of ESG risk, regulatory requirements and voluntary commitments.

Responsible investment

Our wealth businesses have responsible investment policies.

Climate risk disclosure

We’re increasing our climate risk disclosure and participating in industry initiatives to develop standardised disclosure methodologies.

Why managing ESG risk is important  

Risk exists in every aspect of our business and throughout the environments in which we operate. Our capabilities in risk management help us successfully implement our strategic priorities, and develop a resilient and sustainable business that can respond to a constantly changing environment.

How we manage ESG risk

The Group takes a risk-based approach to managing ESG issues. 

Managing ESG risk is part of our day-to-day business and it is identified, measured, monitored, reported and overseen in accordance with the Group’s Risk Management Strategy and Framework and reflected in the Risk Appetite Statement (RAS) and relevant supporting policies and management practices. Processes and tools for managing ESG risk are guided by our Group-wide principles.

To help our employees better understand ESG risk, we include ESG risk content in our annual risk awareness training.

For further information: 

ESG Risk policy settings

We maintain a High Risk ESG Sectors and Sensitive Areas list to help our bankers and procurement professionals know which sectors and activities may have a higher inherent exposure to ESG-related risks. It also sets out sectors and activities where we have restricted or no risk appetite. This includes the nuclear industry, arms-dealing and predatory financing. This list is reviewed and updated to incorporate emerging and changing ESG risks.

Additionally, NAB has disclosed the following customer-related ESG risk policy settings:

  • NAB has clear customer-related ESG policies and risk settings in a number of sectors which provide qualitative risk appetite descriptions and quantitative tolerances or limits with respect to what the Group will and will not finance to assist in managing climate risk. They operate alongside our interim sector decarbonisation targets, set out in the 'Metrics and targets' section of the 2023 Climate Report (PDF, 3MB). The policy settings are set out below:


    • The Group has capped thermal coal mining EAD at 2019 levels, and set a goal to reduce thermal coal mining exposures by 50% by 2026, reducing to effectively zero by 2030 apart from residual performance guarantees to rehabilitate existing thermal coal mining assets. 
    • The Group will not finance new thermal coal mining projects or take on new-to-bank thermal coal mining customers.
    • The Group separately reports its thermal coal-related rehabilitation performance guarantees as part of reporting its resources exposures.
    • The Group will not finance new or material expansions of coal-fired power generation facilities.
    • The Group recognises that currently there are no readily available substitutes for the use of metallurgical coal in steel production. The Group will continue providing finance to its customers in this segment, subject to enhanced due diligence which further considers underlying ESG risks.

    Oil and gas

    • The Group has capped oil and gas at USD $2.28 billion and will reduce our exposure from 2026 through to 2050, aligned to the IEA NZE 2050.
    • The Group will not directly finance greenfield gas extraction projects outside Australia.
    • The Group will only consider directly financing greenfield gas extraction in Australia where it plays a role in underpinning national energy security.
    • The Group will continue to support integrated LNG in Australia, New Zealand , and Papua New Guinea and selected LNG infrastructure in other regions.
    • The Group will not directly finance greenfield oil extraction projects or onboard new customers with a predominant focus on oil extraction.
    • The Group will not finance oil and gas extraction, production or pipeline projects within, or impacting, the Arctic National Wildlife Refuge area or any similar Antarctic Refuge.
    • The Group will not directly finance oil/tar sands or ultra-deep-water oil and gas extraction projects.

    For lending exposure updates refer to page 24 of our 2023 Climate Report (PDF, 3MB).

    For more detail on the actions we’re taking to help meet the goals of the Paris Agreement on climate change, while supporting security of energy supply in Australia and New Zealand, refer to our 2023 Annual Report (PDF, 9MB), opens in new window and our 2023 Climate Report (PDF, 3MB), opens in new window.

  • Our approach to improper land acquisition is incorporated in our human rights approach and Group Human Rights Policy (PDF, 2MB), opens in new window.

    We will not knowingly provide new finance to companies that have a prevailing conviction for improper land acquisition or against which we consider there is credible evidence of material violations of applicable laws and regulations.  

    We will review customer relationships where there is a risk of a customer operating outside the law or not meeting our requirements. If this risk is not addressed to our satisfaction, we may exit the banking relationship.

  • The Group has a set of Animal Welfare Principles (PDF, 312KB), opens in new window to guide bankers in assessing customers’ animal welfare practices and to clarify the Group’s role in supporting customers engaged in any form of business involving animals.

    The principles define good animal welfare practices and outline our expectations that customers will meet required animal welfare regulations, standards and conventions.

  • We are signatories to the Tobacco-Free Portfolio’s Finance Pledge, opens in new window, a global initiative to accelerate progress towards a tobacco-free future. As a signatory to the Pledge, we won’t provide finance for the purposes of growing tobacco or manufacturing tobacco-based products.

ESG risk in lending

The Group’s has three main areas of customer-related ESG policy and guidance to help bankers assess ESG risk as part of credit risk assessment and due diligence processes. These include general ESG risk associated with customers (for example – climate risk, nature-related risk, human rights including modern slavery risk and animal welfare), environmental contamination risk and Equator Principles, opens in new window.

The Group considers exposure to risk, including ESG risk, at a lending portfolio and individual customer level. The Group’s credit risk assessment and due diligence processes include the following steps, appropriate to the relevant sector, business activity and geography: 

  • Origination and internal review 
  • Evaluation  
  • Approval  
  • Documentation and settlement 
  • Customer engagement and monitoring 

For more information refer to the ESG Risk Management section of our 2023 Annual Report (PDF, 9MB), opens in new window, which provides more detail on how ESG risk is incorporated in the credit risk assessment and due diligence process.

Our Business and Private bankers, as well as our Corporate and Institutional bankers, discuss environmental and social risks where relevant with their customers  as part of their business relationships. This enables them to better identify and assess any risks that may arise on a case-by-case basis.

Environmental contamination risk assessments

Our bankers screen general credit applications to determine if NAB's customer-related environmental contamination risk policy should be applied. This is applied if the lending has the potential to involve environmental contamination risks due to:

  • the nature of the industry in which the borrower is involved.
  • the location or nature of the property owned by the borrower (for example, environmentally sensitive sites).
  • an adverse comment made by a valuer in regard to an environmental contamination risk.

Where screening criteria triggers the need for environmental contamination risk assessment, bankers undertake an environmental contamination risk assessment as part of due diligence for a transaction. These assessments are reviewed regularly where material environmental contamination risks are identified.

Key elements of our environmental contamination risk assessment include understanding the:

  • customer's current operations;
  • environmental sensitivity and historical uses of a customer's site;
  • customer's environmental practices, management systems and compliance records;
  • risk of environmental liability transfer arising from customer's environmental contamination issues;
  • nature of any licences, permissions or consents held by a customer;
  • outcomes of any previous site investigations, environmental contamination surveys or audits; and
  • community concerns in relation to the customer's operations.

Project-related finance and the Equator Principles

We became a signatory to the Equator Principles, opens in new window in 2007. This committed the Group to a voluntary set of standards for determining, assessing and managing environmental and social risk in project finance, project finance advisory and project-related corporate loans and bridge loans.

A revised Equator Principles version EP4 (PDF, 493KB), opens in new window came into effect on 1 October 2020. This included strengthened requirements in relation to human rights, revision of the approach to ‘Free Prior Informed Consent’, recognition of the Paris Agreement and introduction of a climate change risk assessment and a broadened scope in relation to project-related corporate loans.

NAB was an active participant in the EP4 development process.

Project-related finance assessment

When we assess opportunities for project-related finance within designated countries, we evaluate them for compliance with the relevant domestic regulatory requirements. Designated countries are those deemed to have robust environmental, social and governance regulatory systems and institutional capacity designed to protect their people and the natural environment.

In addition, for projects located in designated countries, the specific risks of the project are evaluated to determine if one or more of the International Finance Corporation (IFC) Performance Standards could be used as guidance to address those risks, in addition to host country laws.

For projects in all other countries (non-designated countries), we apply IFC and World Bank Environmental, Health and Safety Guidelines, opens in new window.

We apply these policies if there are concerns that the project may present a risk to areas such as environmental habitats, Indigenous peoples or community rights, regardless of the monetary value of the project. 

Our internal standards require an environmental impact assessment for all projects we finance. As at 30 September 2022, of the deals in our project finance portfolio to which Equator Principles applied, 98.3% were in designated countries.

Assessing project-related finance risk

We apply our Equator Principles policy requirements to all relevant transactions. Our assessment and management of risk in project-related financing is based on independent expert due diligence, active risk management and the continual review of policies that are specifically applicable to project-related finance.

Each year, we review the performance of our project finance portfolios' assets, assessing actual environmental and social performance of the financed asset against the contractually required baseline performance.

We also require customers who receive project finance to consider environmental and social compliance risks and, where applicable, encourage them to consider broader environmental and social risks, and to seek and follow relevant expert advice.

Equator Principles Reports

You can find our key Equator Principles statistics on the Equator Principles website, opens in new window.

Read our Equator Principles Reports in Performance and Reporting.

Responsible investment 

Within the Group two key businesses, JBWere and Bank of New Zealand (BNZ), conduct wealth-related activities.

JBWere’s Responsible Investment (RI) Policy (PDF, 2MB), opens in new window and Responsible Investing Framework, opens in new window aim to provide clients with a comprehensive approach to investing for a dual goal: performance and purpose. 

The RI framework spans ESG integration, stewardship of client capital, impact investing, and ethical filters and alignment. Collectively, these pillars align to globally recognised definitions of RI by the Global Sustainable Investment Alliance and reflect global best practice in private wealth.

BNZ’s approach to Responsible Investment, opens in new window and its RI Policy incorporates ESG factors in developing and managing investment options.

Climate risk disclosure 

Sustainable business is good business. It’s our responsibility to make good long-term decisions and help support a strong economy into the future. As part of this long-term approach, sustainability is embedded in our strategy, and includes priorities to tackle some of societies biggest challenges where we are best-placed to make a positive impact, such as climate action.

As a founding signatory of the Principles for Responsible Banking and a member of the associated Net Zero Banking Alliance, we aim to show industry leadership in making a positive impact on society.

Climate change and climate-related policy is having a growing impact on our business, our customers and the communities in which we operate.  We have a key role to play in providing finance to assist the low carbon transition.

We’ve also developed knowledge and understanding of carbon measurement and management through our approach to reducing our own operational footprint through emissions avoidance and reduction, and offsetting residual emissions.

We recognise the growing demand for disclosure of information by financial institutions, including banks, to assist investors and other stakeholders to understand carbon risk in lending and investment portfolios.

We are:

  • disclosing climate risk information in a manner aligned to the Task Force on Climate-related Financial Disclosures recommendations in NAB Group’s half and full year results; and
  • collaborating with Australian and international banking peers to develop a shared understanding and approach to climate risk disclosure by financial institutions.

See climate change, our environmental approach and our 2023 annual reporting suite to find out more about actions we’re taking to deliver on our climate change commitments.

We also continue to respond to the CDP Climate Change request.

We were awarded an A in 2023. Read our CDP survey responses for previous years.

Information on our portfolio exposures is available in our Investor Briefings and Presentations

Explore sustainability at NAB

Learn more about how we serve customers well and help our communities prosper.

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