Belinda van Eyndhoven is the Head of Sustainability at Westpac, with oversight of a huge range of initiatives aimed at everything from housing to agribusiness, as well as the emissions of Westpac’s staff and customers. Here, she talks about the difference the banking system can make in creating a greener economy.
JEREMY HANSEN Belinda, people reading this might wonder how a bank, which doesn’t produce physical objects, addresses sustainability. So I wondered if you could start by outlining what a bank like Westpac can do to help achieve better climate outcomes for everybody.
BELINDA VAN EYNDHOVEN It's a good question and I think there are probably three parts to the answer. The first and, to my mind, the most important one is to really encourage and support those that we lend to to reduce their emissions. I think the second one is to really consider emissions in the goods and services we procure: things like how we get around, the makeup of our fleet, our air travel, all of that. How do we score our suppliers around Environmental, Social and Governance (ESG) metrics? And how do we help them become more sustainable themselves? The last one is about helping our staff to reduce their emissions at work and at home. We've started a whole range of work in that area, looking at things like the way staff commute to and from work and helping them understand the emissions of some of the things they do.
JH It sounds like it's quite finely balanced between carrot and stick, incentives and penalties. I wondered if you could talk a little bit about how you navigate that path in terms of encouraging people that the bank has relationships with to do better, and what foundations you put under that to make it more than encouragement, but possibly enforceable.
BVE The approach we’re taking is, how do we walk that fine line between really encouraging people and providing them with a level of support to transition to a lower-emission way of doing business? We’re a member of the Net Zero Banking Alliance, which is a really good example of the stick and carrot approach: it requires us to set portfolio emissions reductions targets in line with a 1.5 degree [temperature increase] pathway, and work with customers to achieve this. The cost of capital could change, for example, if you aren't aligned to the 1.5 degree pathway and don't have a credible transition plan to get you there. The cost of lending could actually decrease if you have a really good transition plan in place and can access a sustainability loan or another sustainable finance product. It's about doing both.
JH I know you’ve only been in your job a relatively short time, but how do you feel Westpac and the wider industry are progressing on the issues you’ve identified?
BVE I think it's been a massive shift for the industry in the last couple of years. Things like the Net Zero Banking Alliance and our climate-related disclosures regime in New Zealand are based off international frameworks and best practice. Things like that are really pushing the finance sector to think more about not only our own emissions, but the emissions that we finance. For Westpac, we released our first climate risk report in 2020, and we've been working over the last couple of years to really try and improve the quality of our data so we can better understand what emissions we are actually financing. That involves a lot of talking to our customers. And then I think it's about continuing to estimate and disclose the emissions intensity of our portfolio so we're being really transparent with people. We’re also continuing to show the areas where we are most exposed, and for New Zealand generally that’s in the agri sector. So, what are the services and expertise we can support them with? Investors and stakeholders are now far more interested in this space. They don’t want to hear any more talking – they want to see action, to see what we're actually doing to transition.
JH You've mentioned the agri-finance initiatives that Westpac has. I was thinking of how there’s been rapid movement in markets like the EU to specify the emissions requirements for exporters who bring their products to market there. Could you tell me a bit more about how the agri-business sector is changing, and what part Westpac is playing in that?
BVE I’m not an expert in this space, but I can certainly talk to you about some of the work that Westpac is doing, much of which is beyond agri. A lot of the thinking we've been doing at Westpac is about how we position customers to be able to reduce their emissions. We’re trialling sustainable agri loans at the moment, which is a really exciting step for Westpac to think about how we can reward customers with a lower cost of capital for standout emissions and environmental management on farms. This year we've also released our EV [electric vehicle] loan. It’s for everyone – you don't have to be a Westpac customer to apply and get a rate which is significantly lower than a normal car loan. We’ve also been looking at the areas where we can help customers most, and one of them is the expansion of our Westpac Warm Up home loan, which went from $10,000 to a possible $40,000 and is interest-free for five years. That enables you to do things like put solar on your roof, put solar battery storage in, put some EV charging in, double-glaze your home, install heat pumps and so on. All of those things will hopefully reduce costs and reduce emissions. There's more to come in those spaces. We're just working through the next steps. Beyond climate change, and while we're talking about housing, the affordability piece is huge for New Zealand right now. Financial stability is an important part of social sustainability and home ownership can play a big part in that. We've tried to look at funding solutions to overcome a whole heap of challenges. Prefab homes, for example, could be built more cheaply and taken to site, but traditional funding models don't allow for prefab buildings because they are built offsite. So we’ve developed a product called Prebuilt Home Loan, which has helped well over 200 customers by addressing the issue with how the lending was structured. Another big one is papakāinga, shared land and resources that are not owned exclusively by the homeowner. A beautiful example of this is we did some work with Ngāti Korokī Kahukura, who have a piece of hapū-owned land where whānau wanted to have individual lots on the land and individual mortgages, but share a common bespoke wastewater system, common water, and common communal gardens promoting an environmentally sustainable papakāinga. The finance system isn't structured to give individual mortgages to the homes on a shared piece of land, so we've done a lot of work to provide financial solutions via a shared-equity model that would make it useful and affordable for the whānau who wanted to live there. We’ve also worked on a broader shared equity model, because a massive issue is people being able to save the deposit for a home when they're paying high rent. We’ve partnered with Kāinga Ora on their First Home Partner initiative, which is a shared equity model for when the homeowner has a deposit that isn’t sufficient to meet traditional banking lending criteria. Kāinga Ora steps in and contributes up to 25 percent of the purchase price and owns some equity in the home, and the homeowneeventually pays that off. That enables the bank then to lend to Kāinga Ora and the homeowner together, which is exciting because it helps that many more people be able to get onto that home ownership ladder. There’s another thing we’re proud of in the housing area: Queenstown Lakes Trust owns a whole heap of land in an area where housing affordability is crazy. So they’re setting up a system where they can build some great energy-efficient new homes and allow people to purchase those houses on trust land, and when the owner wants to sell, the trust buys it back. It’s quite a different model, but it still enables people to get into a home that they own. It’s a great blueprint for how we could do that in other areas of New Zealand. Along with all this, the Westpac Government Innovation Fund this year has a specific focus on housing with the theme ‘Quality Homes Within Reach’, which is really exciting. We've got a million dollars available to fund ideas that will bring quality homes within reach of more New Zealanders. The ideas that we are really looking for address questions like, how do you repurpose existing buildings? How do you redefine our relationship with ownership like in the examples I’ve mentioned? How do we remove barriers and create conditions to enable innovation to thrive in the housing system in New Zealand? How do we include Indigenous and historical models as well as new technologies?
JH These all sound like great initiatives, but if you don’t mind me asking, what’s in it for the bank?
BVE It all comes down to climate risk being a financial risk. If we lend to customers who aren't thinking about this and aren't transitioning to a lower-emissions way of doing business, they're not necessarily going to be in a position to thrive in future. The opportunity is if we lend at a lower cost of capital to the people and businesses that are really thinking about the future, that's a safer investment for our money. They will likely be more resilient and more likely to prosper in those situations. For housing we have a core strategy outcome of caring for our customers and being fierce advocates for inclusion. Helping people into a home is both good for the customers and their communities and good for the bank. If our customers are financially fit the bank lowers its risk from lending.
JH After many years of what felt like a lot of talking, does it feel to you now that some critical momentum for action is rapidly being achieved?
BVE Absolutely. I think there are a few things that have just taken time to get in place, like the architecture for how we address climate change globally and in New Zealand. We now have a legislative framework for thinking about this; government and business know the roles they’re going to play. I think those things are massive. Another huge shift is that investors are seeing climate change as a long-term risk now. This line has been drawn in the sand that we have to quite aggressively stick to a 1.5 degree target or face some of the consequences if temperature rise is more than that. So I feel like the whole system has started to gear up. Of course it's not fast enough – we need to be going faster and doing more. But this year has really felt different from my perspective.
JH Your job is right at the nub of these pretty fundamental challenges we face. How do you stay optimistic in the face of what can seem like intricate issues to unpick?
BVE You have to be an optimist in this space, or it would just get too depressing. The scale of it is so big and the implications of getting it wrong are so significant. And there's so much hope in the way people come together and in the things that we can change when we work together. Some of the things that make me super-optimistic at the moment are what we talked about in terms of the government architecture landing. That has been a real barrier for action, because it has allowed people to say they’re not sure where government's going and they therefore can't put policy frameworks in place and get on with things. But now that's done, it's in place and we've got emissions budgets, so we can just get on with it. I felt like the discussion a couple of years ago was, ‘this is going to cost too much and it's too hard’. You still get a lot of that, and it does cost a lot and it is hard, but the cost of inaction is greater. A dollar spent on this now is going to save multiple dollars in the future. There are also massive opportunities, not just in the commercial space but for creating the country and the world that we want to live in. We can start putting nature-based solutions at the heart of some of the climate challenges we’re facing. There is the chance to think more systemically around some of these solutions and how they can solve multiple issues that we are having in society – we can solve some really complex problems by using climate as an opportunity. I know there's some stuff that we are not going to be able to avoid, but I think there is some good that can come out of it.
