Australia and New Zealand Banking : ANZ 2021 Climate-related Financial Disclosures

26 November 2021

Market Announcements Office

ASX Limited

Level 4

20 Bridge Street

SYDNEY NSW 2000

ANZ 2021 Climate-related Financial Disclosures

Australia and New Zealand Banking Group Limited (ANZ) today released its 2021 Climate -related Financial Disclosures.

It has been approved for distribution by ANZ's Ethics, Environment, Social & Governance Committee.

Yours faithfully

Simon Pordage

Company Secretary

Australia and New Zealand Banking Group Limited

Australia and New Zealand Banking Group Limited ABN 11 005 357 522 ANZ Centre Melbourne, Level 9A, 833 Collins Street, Docklands VIC 3008

2021 / CLIMATE-RELATED

FINANCIAL DISCLOSURES

Approved for distribution by A N Z's Ethics, Environment, Social & Governance Committee. 26 November 2021

ANZ 2021 Climate-related Financial Disclosures

CONTENTS
Our approach to climate change	1
Summary of our progress
in aligning with the TCFD	3

Our approach to climate change

We support the Paris Agreement's goal of transitioning to net zero emissions by 2050 and are committed to playing our part.

Governance	5
Strategy	5
Risk management	9
Engaging with our customers
on their transition plans	10
Metrics and targets	11
Explanatory notes	16
KPMG Assurance opinion	18

This report has been prepared in accordance with the Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) framework. It covers all ANZ operations worldwide over which, unless otherwise stated, we have control for the financial year commencing on 1 October 2020

and ending 30 September 2021. Monetary amounts in this document are reported in Australian dollars, unless otherwise stated.

KPMG has performed limited assurance over the disclosures in this report. A copy of KPMG's limited assurance report is on page 18.

We want to be the leading Australia - and New Zealand - based bank in supporting customers' transition to net zero emissions by 2050. We have increased our ambition to help achieve that goal through a series of commitments and measures set out in our updated Climate Change Commitment (available on anz.com).

Our environmental sustainability strategy identifies priority sectors, technologies and financing opportunities to help achieve our ambition. ANZ has also joined the Net-Zero Banking Alliance (NZBA) reflecting our commitment with other leading banks globally to enable the transition by aligning our lending portfolio with net zero emissions.

Reducing carbon emissions is a shared societal responsibility and requires a 'whole-of-economy' approach.

We are focused on four key areas:

1 supporting our customers and industries to transition

1. aligning our lending decisions to the Paris Agreement goals
2. reducing our impact by managing and reducing emissions from our operations
3. engaging constructively and transparently with stakeholders.

1. For further information on how we are supporting our customers to transition see our 2021 ESG Supplement (pages 27-28) and 2021 Annual Report (pages 19-21; 38) available at anz.com/annualreport. 2. Our $50 billion target is directed towards sustainable solutions for our customers, including initiatives that help improve environmental sustainability, increase access to affordable housing and promote financial wellbeing. The majority of the target is directed towards environmental sustainability initiatives that help customers to lower their emissions. Explanatory notes relating to our $50 billion sustainable finance target are on page 80 of our 2021 ESG Supplement available at anz.com/annualreport.

1. SUPPORTING OUR CUSTOMERS AND INDUSTRIES TO TRANSITION

The most important role we can play in enabling the transition to net zero is to support our customers to reduce emissions and enhance their resilience to a changing climate.1 We will achieve this by:

• executing our environmental sustainability strategy and providing finance, services and advice that support customers' shift to low carbon business models and operations that put them on a path to net zero emissions.
• encouraging and supporting 100 of our largest emitting business customers to implement and, where appropriate, strengthen their low carbon transition plans and enhance their efforts to protect biodiversity, by end 2024. This work will be undertaken through a structured and ongoing engagement process.
• funding and facilitating at least $50 billion by 2025 to help our customers lower their carbon emissions.2 This may include increased energy efficiency, low emissions transport, green buildings, reforestation, Indigenous land management practices, renewable energy and battery storage, emerging technologies (such as carbon capture and storage, and hydrogen-based technology), disaster resilience and climate change adaptation measures.
• • We will allocate $1 billion of this towards supporting customers' and communities' disaster recovery and resilience. We will do this by allocating capital to fund or facilitate resilience initiatives for weather-related events, or to build resilience against non-weather related disasters.
• equipping our employees with a deeper understanding
  of climate risks and opportunities, including the potential of emerging technologies, focussing on our Institutional bankers in key customer segments.

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ANZ 2021 Climate-related Financial Disclosures

2. ALIGNING OUR LENDING DECISIONS TO THE PARIS AGREEMENT GOALS

Our success in supporting and accelerating a net zero transition will be driven by our ability to help our customers reduce their emissions. To reduce our portfolio emissions, we commit to aligning our lending with the Paris goals by:

• developing metrics and targets for our lending to key sectors, starting with our power generation portfolio and large-scale commercial buildings. We will progressively expand our coverage of key sectors, in line with our NZBA commitment and the evolution of globally recognised standards and methodologies, noting there is no single method that covers all relevant sectors and asset classes.
• factoring climate change risk into our lending for large business customers, primarily by assessing their capacity to respond to climate change and the evolving regulatory landscape.
• expecting new business customers or projects in the energy sector to disclose Paris-aligned business plans.3 This includes the extent to which their company strategy, emissions reduction targets and planned capital expenditure is aligned with the Paris goals.
• expecting our existing business customers in higher-emitting sectors, such as energy and transport, to integrate climate change risk into their company strategies. Specifically, by 2025 we expect our energy customers to:
• • establish specific, time bound, public transition plans and diversification strategies

• report transparently on climate risks and opportunities - outlining how their business will be resilient in a range of climate scenarios, including scenarios aligned with the Paris goals - preferably using the TCFD framework
• participate in industry initiatives that will contribute to reducing emissions, for example, in the oil and gas sector, capturing and storing methane in line with the Methane Guiding Principles
• measure and disclose the Scope 3 emissions from use of their products and any progress in reducing those emissions
• measure and disclose their progress in reducing emissions in their value chains - for example, by reducing emissions from shipping and distribution.

3. REDUCING OUR IMPACT BY MANAGING AND REDUCING EMISSIONS FROM OUR OPERATIONS

We are committed to reducing our operations' Scope 1, 2 and 3 emissions to manage our climate impact and are:

• accelerating the reduction of our own emissions by sourcing 100% of the electricity needed for our business operations from renewables by 2025.
• lowering our Scope 1 and 2 greenhouse gas emissions by 24% by 2025 and 35% by 2030 (against a 2015 baseline).
• seeking to empower our employees to live and work more sustainably by providing access to relevant information and incentives.

4. ENGAGING CONSTRUCTIVELY AND TRANSPARENTLY WITH STAKEHOLDERS

We recognise it is vital to work collaboratively with our stakeholders to help support the transition to net zero emissions and are therefore:

• continuing to engage with 100 of our largest emitting business customers to support them to improve their low carbon transition plans.
• engaging with stakeholders on climate change and increasing our transparency on our approach through ESG market briefings, investor roundtables and other avenues.
• disclosing how we identify, assess and manage climate-related financial risks and opportunities using the TCFD recommendations.
• disclosing metrics on the emissions impact of our financing, and setting targets to reduce this impact, starting with commercial property and power generation.
• developing an enhanced climate risk management framework by end 2022 that strengthens our governance and is responsive to climate-related risks and opportunities.
• participating in efforts to develop appropriate regulatory and prudential frameworks, including working closely with the Australian Prudential Regulation Authority (APRA) and participating banks on its first climate vulnerability assessment.
• engaging, as appropriate, in public policy discussion on climate change and increasing transparency on our approach. This includes disclosing the industry associations we are members of and reviewing alignment on key relevant policy positions.

3. The energy sector includes integrated oil and gas companies involved in exploration, development and refining as well as low carbon energy solutions, thermal coal mining, and integrated power utility companies such as renewable energy and coal.

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ANZ 2021 Climate-related Financial Disclosures

Summary of our progress in aligning with the TCFD

This is the fifth year we have reported using the recommendations of the Financial

Stability Board Task Force on Climate-related Financial Disclosures (TCFD).

Our aim is to provide investors and other stakeholders with clear information, enabling them to assess the adequacy of our approach to climate change and our ability to manage the associated risks and opportunities. We acknowledge the TCFD has recently released updated guidance on implementation of the framework,

as well as guidance on metrics, targets and transition plans, which we will use to inform future disclosures.

TCFD theme	Our progress to date	Focus areas - 2022/23	Beyond 2022 vision
Governance	• Board Risk Committee oversees management of	• Aligning with regulatory guidance on climate-related	• An enhanced risk management framework that
	climate-related risks	risk governance, including stress-testing of selected	anticipates potential climate-related impacts, and
	• Board Ethics, Environment, Social and Governance	portfolios	associated regulatory requirements
	(EESG) Committee approves climate-related objectives,
	policy and targets
	• Ethics and Responsible Business Committee (executive
	management) oversees our approach to environment,
	social and governance (ESG) risks and opportunities,
	and reviews climate-related risks

Strategy	• ANZ's Climate Change Commitment (available on
	anz.com) confirms support for the Paris Agreement
	goals and transition to a net zero carbon economy
	• Managing the net zero carbon transition focuses on
	an orderly transition that recognises and responds to
	social impacts
	• Participated in APRA's climate vulnerability assessment
	(CVA) to assess portfolio transition and physical risks
	• Low carbon products and services within our
	Institutional business focused on climate-related
	opportunities
	• Analysis of flood-related risks for our home loan
	portfolio in a major regional location of Australia and
	associated test-pilot of socio-economic indicators
	showing financial resilience of home loan customers
	with respect to flood risk

• Extending analysis of flood-related risks to incorporate bushfire and other risks relating to retail customers through the CVA
• Including climate risk reference in lending guidance documents for relevant industry sectors used by our front line bankers

• ANZ business strategy to grow in a way that is more closely aligned to a resilient and sustainable economy that supports the Paris Agreement goals and Sustainable Development Goals (SDGs)

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