Carbon Disclosure Project

Transcription

1 Carbon Disclosure Project CDP 2013 Investor CDP 2013 Information Request Westpac Banking Corporation Module: Introduction Page: Introduction 0.1 Introduction Please give a general description and introduction to your organization The Westpac Group ( Westpac ) is a financial services company with operations in Australia, New Zealand (NZ), the United Kingdom (UK) and the near Pacific region and maintains offices in other key financial centres around the world. Westpac is ranked in the top 5 listed companies by market capitalisation on the Australian Securities Exchange. As at 30 September 2012, our market capitalisation was A$76.5 billion and the Group employed approximately 36,000 people (full time equivalent basis). The Westpac Group has three key customer facing divisions serving around 12 million customers: Australian Financial Services (AFS), Westpac Institutional Bank (WIB) and New Zealand Banking (WNZL). AFS encompasses our retail and business banking operations in Australia and includes the business units (BUs) of Westpac Retail & Business Banking, St.George Banking Group and BT Financial Group as well as Banking Products and Risk Management. WIB delivers a broad range of financial services to commercial, corporate, institutional and government customers with connections to Australia and New Zealand as well as banking services throughout the near Pacific; and WNZL is responsible for sales and service of banking, wealth, and insurance products for consumer, business and institutional customers in New Zealand. Westpac's vision is 'to be one of the world's great companies helping our customers, communities and people to prosper and grow'. Achieving this requires us to manage our direct and indirect environmental impacts, including dealing with the critical issue of climate change. Climate change will have significant economic, social and environmental impacts in the regions in which we operate. This means that our investment, lending and operational decisions must take these impacts into account, but we also expect to drive shareholder value through our response. We were amongst the first Australian companies to take action on climate change: publicly reporting our emissions since 1996; responding to the CDP each year since it began; and we have a strong history of calling for early action on climate change from government and the broader business community. In 2008, we launched a five-year climate change strategy building on our existing activities, together with our position statement 'Transitioning to a low carbon economy'. This sets out our perspective on the science, economics and social impacts of climate change, impacts for our business, the role of the finance sector and includes a Action Plan. It confirms our commitment to taking a precautionary approach to managing climate change and to embedding a whole of value chain approach to addressing climate change impacts across our operations. It was developed following extensive internal and external stakeholder consultation and approved by the Group Executive and Westpac Board. These principles are re-iterated in various commercial, marketing and capabilities documents. Following an extensive Board-led review over , the Group has agreed an explicit sustainability focus on longer term issues and mega-trends as core strategy. Our aim is to have a positive societal impact on the trajectory of these issues whilst pursuing the future growth opportunities they represent. Climate change and other environmental challenges form one of three priority issues for action in the concrete plan - the Group s sustainability strategy - launched in February In addition to the new longer-term focus and new objectives, the governance of our direct footprint has been enhanced with the formation of a Group-wide Environment Management Committee (EMC) in November 2012 is overseeing performance improvements across a broadened environmental

2 dashboard and the transition to carbon neutrality. Overall we continue to drive awareness and action in the community and amongst business and policymakers to help in the transition to a low carbon economy. Ultimately all parts of the economy will need to collaborate to effectively address climate change. For further information on the Group see " 0.2 Reporting Year Please state the start and end date of the year for which you are reporting data. The current reporting year is the latest/most recent 12-month period for which data is reported. Enter the dates of this year first. We request data for more than one reporting period for some emission accounting questions. Please provide data for the three years prior to the current reporting year if you have not provided this information before, or if this is the first time you have answered a CDP information request. (This does not apply if you have been offered and selected the option of answering the shorter questionnaire). If you are going to provide additional years of data, please give the dates of those reporting periods here. Work backwards from the most recent reporting year. Please enter dates in following format: day(dd)/month(mm)/year(yyyy) (i.e. 31/01/2001). Enter Periods that will be disclosed Fri 01 Jul Sat 30 Jun Country list configuration Please select the countries for which you will be supplying data. This selection will be carried forward to assist you in completing your response Select country Australia New Zealand United Kingdom Rest of world

3 0.4 Currency selection Please select the currency in which you would like to submit your response. All financial information contained in the response should be in this currency. AUD ($) 0.6 Modules As part of the request for information on behalf of investors, electric utilities, companies with electric utility activities or assets, companies in the automobile or auto component manufacture sectors, companies in the oil and gas industry and companies in the information technology and telecommunications sectors should complete supplementary questions in addition to the main questionnaire. If you are in these sectors (according to the Global Industry Classification Standard (GICS)), the corresponding sector modules will not appear below but will automatically appear in the navigation bar when you save this page. If you want to query your classification, please If you have not been presented with a sector module that you consider would be appropriate for your company to answer, please select the module below. If you wish to view the questions first, please see Module: Management [Investor] Page: 1. Governance 1.1 Where is the highest level of direct responsibility for climate change within your company? Individual/Sub-set of the Board or other committee appointed by the Board 1.1a Please identify the position of the individual or name of the committee with this responsibility In March 2012 the Board re-assumed the responsibility for sustainability, including climate change, and dissolved the Board Sustainability Committee in order to have full oversight and monitoring along with other committees as appropriate.

4 The role of the Board is to provide strategic guidance for Westpac and its related bodies corporate (Westpac Group) and effective oversight of management. The Board is accountable to security holders for the performance of the Westpac Group s businesses. In performing its role, the Board aspires to excellence in governance standards. (see attached Board Charter) 1.2 Do you provide incentives for the management of climate change issues, including the attainment of targets? Yes 1.2a Please complete the table Who is entitled to benefit from these incentives? The type of incentives Incentivized performance indicator Board/Executive board Management group Business unit managers Energy managers Monetary reward Recognition (non-monetary) Monetary reward Monetary reward In March 2012 the full Board re-assumed the responsibility for sustainability, including climate change, and dissolved the Board Sustainability Committee in order to have full oversight and monitoring along with other committees as appropriate. However, before the Board re-assumed responsibility for the oversight and monitoring of Westpac s sustainability agenda, including the management of climate change issues, the Sustainability Committee Chairman Fees were $30,000, and Membership Fees were $15,000. The Sustainability Council with delegated authority from the Executive Team has a decision-making role on top of providing practical coordination and sharing best practice with regards to the management of climate change issues. As a member of the sustainability council, General Managers also have the opportunity to raise their profile at internal events and in the external media. A number of General Managers and BU Heads have bonuses tied to achieving components our sustainability strategy, including the objective to reduce our environmental footprint through, amongst other targets, making our operations carbon neutral over the life of the strategy 2013 to 2017, as well as objectives relating to increased financing to the CleanTech and environmental services sector, and the development of products to help customers manage their environmental impacts. In 2012, Westpac announced new environmental targets that provide a more detailed view of our performance, including maintaining current levels of kwh of electricity/m2 for commercial and retail sites for 2013 as well as reporting the specific data centre measure, Power Usage Effectiveness, for the first time. Energy managers across the Group have bonuses tied to the achievement of these targets.

5 Who is entitled to benefit from these incentives? The type of incentives Incentivized performance indicator Environment/Sustainability managers All employees All employees Other: Selected Managers Public affairs managers Monetary reward Monetary reward Other nonmonetary reward Monetary reward Monetary reward Delivery of climate strategy can account for up to 50% of at risk remuneration for Sustainability managers. Delivery against the commercial carbon strategy accounts for up to 100% of remuneration for emissions and environment roles within WIB. Sustainability is included as a category in the balanced scorecard of all employee's and performance against their scorecard determines an employees bonus. For many employees this category is with regards to climate change activities e.g. promoting, developing or implementing emission reduction initiatives. The CEO Community & Environment Awards recognise both an individual employee & a team who have demonstrated outstanding support for their community and/or the environment The winners of the Awards are people who have gone beyond what is expected to make a difference to their local community and/or environment. Both the individual and team Award winners will receive a donation of $10,000 for their chosen community organisation or environmental cause. A number of managers within WIB have performance objectives that include building customer awareness of our climate change capabilities and successfully executing carbon and carbon related finance and investment opportunities. This is also includes the effective application of environmental risk. Climate change advocacy and perception scores form 25-50% of objectives linked to at risk remuneration for public affairs managers, as does internal engagement in sustainability issues, including climate change. Attachments CDP 2013/Shared Documents/Attachments/InvestorCDP2013/1.Governance/BoardCharter.pdf Page: 2. Strategy 2.1 Please select the option that best describes your risk management procedures with regard to climate change risks and opportunities Integrated into multi-disciplinary company wide risk management processes 2.1a

6 Please provide further details Climate change risks & opportunities are identified & prioritised via traditional risk management mechanisms as well as specialised processes. Climate change has been considered in these processes for over 10 yrs. The scope of these process are addressed below & cover strategy development, operational risk, credit risk, business continuity planning (BCP), reputational risk, regulatory risk, a stakeholder engagement framework & strategic partnerships. Strategy development In December 2011 the Board Sustainability Committee (BSC) endorsed a sustainability strategy to anticipate & respond to the most pressing emerging societal issues where the bank has the skills & experience to make a meaningful, positive impact. In March 2012 the full Board re-assumed responsibility for sustainability & dissolved the BSC in order to have full oversight & monitoring along with the relevant sub-committees, as appropriate. For instance ESG Risk policy is approved by the Board Risk Management Committee (BRMC). The Executive Team (ET) continues to have explicit responsibility for sustainability performance & the Sustainability Council (SC) with delegated authority from the ET was reformulated at General Manager level in February 2011 to enhance the ET's decision-making role. The Group-wide strategy & objectives are agreed at ET & Board level & reflected in the annual Business Strategy Review (BSR) process, supported by quarterly internal reporting to the SC and half-yearly reporting to the ET & Board. The Board has responsibility for oversight of sustainability policies & practices (in addition to new or continuing issues requiring attention). Operational risk BCP takes an all hazards approach, incl. planning for natural disasters to ensure customer, regulatory, financial & reputational issues are best managed. The BCP is reviewed annually by operational risk, internal & external auditors. Risks are considered at the operational level with appropriate plans put in place to cover key risks; systems ensure the continuation of essential operations, continuity of service for impacted customers & compulsory training for employees which include specific aspects in respect to natural disasters & other climate events. BCPs are aligned to our customers needs & also Australian Prudential Regulation Authority (APRA) regulatory requirements. The completeness of these plans are attested to by the Group to APRA annually. Environmental Social & Governance (ESG) Credit Risk Management Framework As the majority of our climate risks are indirect our ESG Risk Framework including credit, investment & supply chain risks is a key framework for managing our approach, where credit or the loan book can be regarded as the organisation's assets. The framework is endorsed by the Board Risk Management Committee (BRMC) & is formally reviewed at least every 2 years (last updated July 2012). Responsibility for the identification, management & reporting of ESG risks extends across the Group's business operations, credit & lending, supply chain & investment management. The Group & underlying divisional frameworks address ESG risks & opportunities at the country, sector, company & transaction levels. A framework for WNZL was established in 2013 to apply specifically to NZ. ESG credit risk policy This policy incorporates ESG risk into credit decision making at the transaction & sector level. Reviewed annually (last reviewed May 2013), it has been extended to provide guidance for addressing ESG risk in-country analysis. Detailed divisional ESG policies, sector policies & issue-specific position statements support the Group policy & clarify our approach to assessing the ESG dimensions of our financing & lending activities. For example, in WIB the relevant policy captures ESG, reputation & sensitive transaction risks, as applied to particular transactions & customer relationships. Under these policies, ESG credit risks are considered at every point of analysis including origination & annual review. This process is outlined in Westpac s Approach to Sustainable Finance ( and attached). The position statements are developed & reviewed every 2 years by Group Risk in conjunction with WIB, AFS & Group Sustainability. A dedicated client engagement program supports this process undertaken with high risk clients across industry sectors as well as input from other key stakeholders, including NGOs, the scientific community & the general public. The commercial implications of climate risk are embedded, where appropriate, into both the AFS & WIB Credit Manuals. This is disaggregated between ESG, regulatory risk, market risk & physical risk implications. During the credit evaluation process these risks are assessed at the country, industry, sector, customer & transaction level. Country & industry sector reviews are undertaken annually and customer reviews are undertaken on a rolling month basis, or sooner, as

7 required. Specific environmental & sector policies that encompass customer & transaction underwriting standards further support this process. This ensures that all ESG risks identified in the sector strategy review are assessed as part of the credit evaluation process. Additional high impact issues receive further analysis on an ongoing basis. Also embedded in AFS credit manual is the management of client s direct carbon reporting requirements, with specific requirements included for managing, monitoring and reporting mandatory NGER provisions. To assist in the effectiveness of this process, additional training is provided for Credit Risk Officers, Analysts & Risk Managers on identifying & managing ESG risks, including carbon price impacts. An annual assessment of customer exposure to carbon price impacts has been undertaken for Australia annually since 2011, with results reported to WIB & the Group Executive Teams & the Board. Supply chain risk The supplier selection risk assessment process includes mandatory sustainability assessment for all contracts. It forms part of the tender process, an integral part of the contract & is regularly reviewed during the contract's life. If supplier's performance is inadequate, a Remedial Action Plan is required providing annual updates against items identified. This also includes having effective BCP in place. Reputation risk The BRMC & Operational Risk Compliance Committee (OPCO) both have oversight & ongoing review of the Reputation Risk Management Framework. Divisional OPCO's or Divisional Risk Committees monitor the Division's reputation risk profile, delivery against action plans & effectiveness of management, & escalate issues to Group OPCO as appropriate. Awareness of reputation risk is promoted throughout the Group as it is the responsibility of all employees to safeguard the reputation of the Group & to identify, measure, & manage reputation risks, including those related to climate change this is particularly relevant in Australia where climate change remains a divisive issue. Regulatory risk Regulatory developments within our areas of operations & globally are monitored by Enterprise Compliance & Regulatory Affairs & logged in a Regulatory Change Register. Each item is assigned to BUs for action. For climate change this has included mandatory reporting legislation managed by Group Property, proposed carbon trading legislation managed by WIB, carbon farming managed by our agribusiness team & local council approaches to sea level risk managed by our credit risk areas. Stakeholder engagement framework & strategic partnerships Group Corporate Affairs & Sustainability coordinate strategic stakeholder & community relations activities to identify emerging ESG risks & maintain strategic partnerships with key organisations to ensure that the Group is responding appropriately. Material issues are identified, prioritised & defined with respect to their impact on our stakeholders & our business via an annual review process. These issues are reviewed externally & internally against AA1000APS (2008) before being assured by KPMG & reported in the Annual Review and Sustainability Report (see attached), Annual Report and online. The Group s approach is designed to embed the consideration of climate change impacts w 2.2 Is climate change integrated into your business strategy? Yes

8 2.2a Please describe the process and outcomes i) Explicit inclusion of sustainability leadership, including climate change, is necessary to deliver WBC s vision to be one of the world s great companies, helping our customers, communities & people to prosper & grow. This vision guides all strategy development across the business. Strategy development is led by Group Strategy and includes inputs from the Sustainability Council (SC), the annual AA1000APS (2008) sustainability materiality analysis, & Business Units (BU) inputs. E.g. Industry sector reviews incorporating ESG undertaken within WIB. The focus of WBC s overall strategy to 2017 (finalised in August 2013) is to respond to longer term shifts & mega-trends in the operating environment. Climate change components are implemented within BU strategy. The 5 components approved by the Board are: - managing our footprint; - risk management & capacity building; - products & services to assist customers manage impacts; - employee engagement; & - communication & advocacy. In February 2013, WBC also launched its Sustainability Strategy which identified 3 priority issues for action, based on an assessment of the strategic mega-trends over the next 30 years, including Economic Solutions for Environmental Challenges. This has 3 objectives: 1) Providing solutions that help customers adapt to environmental challenges 2) Lending & investment in CleanTech & environmental services 3) Reducing our environmental footprint, including targets for kwh of electricity/m2 for commercial & retail sites, & a specific data centre measure (Power Usage Effectiveness) for the first time. In recognition that our previous emissions reduction activities have meant that many of the opportunities for reductions have been implemented, we will also make our operations carbon neutral over this period. Strategy implementation progress is monitored & reported quarterly to the Group-wide Sustainability Council & six monthly to the Executive Team & the Board. Additional items reported to the Board throughout the year have included: market share in climate change related segments, progress in incorporating carbon into credit risk processes & product development, our advocacy position, responses to emerging regulation & stakeholder feedback. Operationally, the Environment Management Committee (EMC), meets every 6 weeks to monitor progress against objectives & review policy & procedural frameworks. The WIB Carbon Deal Team meets fortnightly & reviews carbon commercial opportunities, & the Renewable Energy Committee meets quarterly & oversees renewable energy investment. ii) Key areas of climate change influencing the strategy include: Emerging markets in CleanTech, environmental services & carbon trading in WIB; Physical risks to the agricultural sector in business banking; & The need to understand the overall carbon exposure & mitigation paths within our lending & investment activities. Overall, as outlined in our sustainability strategy, we recognise the need to engage with all client sectors to help customers manage their environmental challenges, including those related to climate change. iii) Key components of short-term strategy include: - new environmental targets that provide a more detailed view of our performance, - changes to risk appetite, risk management & underwriting practices to account for ongoing regulatory uncertainty & risks; - training for employees who assess risk or engage customers in high risk sectors; - proactive client engagement to understand risk mitigation activities & potential product & service needs; - stronger governance for WBC s operational processes to deliver against mandatory reporting legislation & new objectives; - integrating carbon price impacts into procurement decisions & supplier screening;

9 - new retail finance products, including a commitment launch one provide or service each year to help our retail customers meet their environmental challenges. This already includes our SunPower flexi-loan to help fund the adoption of household solar & interest free loans for employees to fund energy & water saving activities in their own home; & - identification of emerging customer segments in a carbon constrained environment & resource allocations to support growth, including the February 2013 announcement that the Group will make available up AUD6B for lending & investment in CleanTech & environmental services by This investment in the short-term is to grow the sector & develop relationships in the longer term. iv)key components of long-term strategy include: - stronger integration of adaptation factors in credit & investment policies, processes & decisions, including sector reviews & individual transactions; - new insurance & investment products for a range of emerging market segments; - engaging retail customers on minimising exposure to rising energy costs, identifying commercial opportunity & building greater resilience; & - more strategic & sophisticated responses to issues of resource scarcity & related challenges. v) Our February 2013 announcement to lend & invest up to AUD6bn in CleanTech & environmental services further cemented our reputation in this emerging & growing sector. Embedding our response to climate change within our business is delivering competitive advantage via: - Revenue growth in the CleanTech & environmental services sector; - Renewable energy investment growth. 51.7% of the total lending in the energy sector already goes to hydro & renewables, demonstrating our commitment to the sector; - Pursuing an organic growth strategy has provided greater resilience to the volatility of short-term political & market developments. This strategy has seen a range of credit & relationship managers develop expertise in carbon; - Strong market recognition due to effective public advocacy led by CEO & business; - The achievement of our 2008 objective to be a top 3 regional player in carbon related by E.g. Voted Best Trading Company in Australasia in the global Environmental Finance Awards 2010, 2011 & 2012 by customers, peers & competitors providing best service in carbon markets; - Trading EU ETS since 2006, first to trade NZ ETS & trading the Australian Carbon Price Mechanism, including international units eligible in all 3 jurisdictions. Linking Aust-EU carbon markets (2015) further extends our carbon market capabilities. vi) Fundamentally the most substantial business decision has been the decision to pursue a leadership position on carbon & climate change, this has included: - A clear public advocacy role; - Support for emerging carbon markets, playing a role as market maker; - The formation of a renewable energy strategy; & - A formal target on lending & investment to CleanTech & environmental services (up to AUD6bn by 2017). 2.2b Please explain why not 2.3

10 Do you engage in activities that could either directly or indirectly influence policy on climate change through any of the following? (tick all that apply) Direct engagement Trade associations Funding research organizations Other 2.3a On what issues have you been engaging directly? Focus of legislation Cap and trade Corporate Position Support Details of engagement We are engaged in ongoing consultation on various technical design aspects of the implementation of the Aus Carbon Price Mechanism under the Clean Energy Act & the ongoing refinement of the NZ ETS. In Australia these relate to the functioning of the market, such as process for Auctioning Carbon Units, determination of the reference price for fuels & Aust-EU market linking provisions. In New Zealand, we have engaged on proposed options for the carry over of Kyoto Units under the NZETS. We provided written submissions, participated in departmental roundtables and engaged directly with regulators and policy makers on draft proposals released for public consultation. Proposed solution Our core position is set out in the Westpac Group Climate Change Position Statement. Our position on key elements of market design is endorsed at the Board level and informs all government engagement. WBC supports a market-based approach to pricing carbon as the least cost & most efficient means of pricing carbon. Westpac strongly supports linking to and alignment with international markets following the move to the floating price period (post 2015). This will lower the cost of compliance for liable entities and support the emergence of an international carbon price signal. In making recommendations, a number of considerations inform our position. Market design and implementation frameworks must support: - Investment certainty; - Market confidence; - Environmental outcomes; - Affordable and efficient greenhouse gas abatement across the economy; & - A clear understanding of ongoing liabilities. Auctions: Westpac supports the overarching policy objectives of the promoting allocative efficiency and transparent and efficient price discovery. Westpac s feedback is primarily concerned with promoting procedural outcomes which support the timely and efficient completion of the ascending clock auction. Reference price: Westpac broadly supported the approach set out, with two concerns: using a six-month period (2 auctions) to set the reference price & the potential for disconnection from the price traded in the secondary market; and the proposal for obtaining prices for each of the international units referenced. Aust-EU linking: Westpac broadly supported the approach set out for consultation, to establish an interim indirect link between the Australian and EU registries, before moving to a direct two-way link. We supported the move to two-way international linking as soon as possible, to allow liable entities to manage their compliance obligations efficiently and minimize operational risk. NZ Kyoto carry-over: Westpac supported the proposal to not allow individual account holders to carry over

11 Focus of legislation Clean energy generation Adaptation resiliency Other: Review of targets and caps Corporate Position Neutral Support Undecided Details of engagement Engaged with the Aust Climate Change Authority on the Renewable Energy Target (RET) review. Westpac is a member of the Australian Business Roundtable for Disaster Resilience and Natural Disasters together with IAG, Optus, Munich Re, Investa and the Red Cross. The Roundtable has commissioned a white paper look at the cost benefits of investing resilience activities pre-disaster in order to reduce the economic and social impacts of major weather events. Australia has just commenced a substantial review of national emissions reduction targets and CPM scheme caps. Westpac is in the early stages of engagement of this issue. Proposed solution any ERUs and CERs after the true up period; and the proposal to allow the automatic carry-over of all AAUs held in the New Zealand Emissions Unit Register (NZEUR) to minimise the administrative burden. We also requested additional clarity over a number of related matters on post-2015 market arrangements. Westpac participated in dialogue and engagement with the CCA regarding the investment and market implications of a number of matters under consideration as part of the review. The Roundtable is calling for a more coordinated approach and greater focus as well as national and local investment in resilience measures, before disasters occur. Full details of the white paper will be launched in late June and will be available at At the time of writing, WBC has not yet published a formal position on this issue. More broadly, Westpac believes that the setting of national targets is a role for Government, with due consideration to the science and economic implications. - Westpac supports the implementation of long, loud and legal emission reduction targets to promote certainty for business investment. - Westpac supports a non-partisan approach to target setting wherever possible. 2.3b Are you on the Board of any trade associations or provide funding beyond membership? Yes 2.3c Please enter the details of those trade associations that are likely to take a position on climate change legislation

12 Trade association Is your position on climate change consistent with theirs? Please explain the trade association"s position How have you, or are you attempting to influence the postion? Business Council of Australia Australian Bankers Association Australian Financial markets Association New Zealand Financial Markets Association Consistent Consistent Consistent Consistent The BCA has a high level position in favour of a market based price on carbon, which is broadly consistent with Westpac s view. WBC s perspective is frequently more detailed and more focused on the technical operation of the carbon market in particular. The ABA supports the application of a market based price on carbon, and the efficient and effective operation of carbon policies via financial instruments. AFMA engages with regulatory and government authorities on a number of aspects of the technical design, implementation and operation of the Australian carbon market and related impacts. NZFMA engages with regulatory and government authorities on a number of aspects of the technical design, implementation and operation of the NZ carbon market and related impacts Westpac is a longstanding member, and participant on the Board of the BCA. WBC also maintains ongoing dialogue with policy directors within the BCA on key areas of carbon market policy development. WBC is a member of the ABA Board, numerous policy and working group committees on aspects of carbon market design and renewable energy policy frameworks, and engages on an ongoing basis around key policy issues and impacts. WBC directs policy engagement on carbon related matters via our position as Chair of the Carbon Markets Committee and a member of the AFMA Electricity Committee. WBC is Deputy Chair of the NZFMA Carbon Markets Committee. 2.3d Do you publically disclose a list of all the research organizations that you fund? Yes 2.3e Do you fund any research organizations to produce public work on climate change? Yes

13 2.3f Please describe the work and how it aligns with your own strategy on climate change Westpac has a number of relationships with organisations undertaking climate change & related research including: Banking Environment Initiative (BEI) - this multibank initiative seeks to lead the banking industry in collectively directing capital towards environmental & socially sustainable eco-development. BEI has engaged with corporate clients in a clean energy collaboration to research & address the systemic blockages to clean energy investment, including existing valuation methodologies at the project & corporate level. This is consistent with Westpac s climate strategy focus on risk, including risk settings. Climate Institute we have been a lead partner of the Climate Institute s Climate Partner s Network since 2010 which aims to promote business leadership in driving climate change and better inform policy debate. This has most recently included research into preparedness by industry sector for a changing climate in the report Coming Ready or not. This aligns both to a number of objectives within our climate change strategy including advocacy but also risk management, by enhancing our own understanding of direct and indirect risks associated with climate change, in this case adaptation risk. Australian Business Roundtable for Disaster Resilience and Safer Communities although the modelling in this research paper does not explicitly include the impacts of climate change and can therefore be considered conservative in its estimates, this white paper, undertaken by Deloitte Access Economics and commissioned by Westpac, IAG, Optus, Munich Re, Investa and Red Cross looks at the rising social and economic costs of natural disasters and calls for greater coordination and funding of activities before disasters occur. The results will be released in June and be available at This is again consistent with our broader advocacy strategy to raise awareness of the economic consequences of environmental issues & encourage action, in particular in relation to adaptation & resilience, & supports our broader engagement activities in communities impacted by natural disasters. ACF Australian Business Roundtable on Climate Change Westpac was a member of the roundtable that released a paper outlining the Business case for early action on climate change. Key recommendations in the paper included: a legal framework to establish a carbon price signal; support for innovation and investment in emerging and breakthrough technologies; and, building national resilience to the impacts of climate change UNEPFI Westpac is a founding signatory to UNEPFI & has actively engaged in its work on a range of environmental issues, most notably water a key adaptation issue in our primary areas of operation. ACE CRC Westpac has engaged ACE CRC to undertake employee information sessions on climate change adaptation issues in support of our broader internal capacity building goals. 2.3g Please provide details of the other engagement activities that you undertake We have undertaken a comprehensive client engagement program to better understand the key risks and opportunities for our clients. This has followed on from a program of internal engagement including the training of over 1800 employees in climate risk and has been supported by the development of a client engagement toolkit. In addition in forming both our climate change strategy as well as underlying policies and targets we have engaged with a range of stakeholders including customers, NGOs and the scientific community.

14 Other engagement activities that we undertake include a Carbon Series events being managed & preseented by Davidson Institute designed to provide detail on what the carbon price is, and how it impacts the general operation of a small business. We also continue to engage with government and copies of our formal submissions can be found on our website at 2.3h What processes do you have in place to ensure that all of your direct and indirect activities that influence policy are consistent with your overall climate change strategy? Our climate change position has been formally endorsed by the Board and ET. All policy activities must be in line with this approved position and are reviewed by our Director Environment and Emissions as well as the Government and Industry Affairs team to ensure consistency. There are approved spokespeople on climate related issues, consistent with our approach to a range of banking issues. In addition there is a climate change toolkit available on our intranet site which outlines the position and reinforces processes for policy comments and submissions. 2.3i Please explain why you do not engage with policy makers Attachments CDP 2013/Shared Documents/Attachments/InvestorCDP2013/2.Strategy/Position_statement_on_sustainable_finance.pdf CDP 2013/Shared Documents/Attachments/InvestorCDP2013/2.Strategy/2012_Annual_Review_and_Sustainability_Report.pdf Page: 3. Targets and Initiatives 3.1

15 Did you have an emissions reduction target that was active (ongoing or reached completion) in the reporting year? Absolute target 3.1a Please provide details of your absolute target ID Scope % of emissionsin scope % reduction from base year Base year Base year emissions (metric tonnes CO2e) Target year Comment A1 Scope % 30% This target is a 30 June target and does not relate to renewable energy purchases. In 2008, we set ourselves an ambitious task to achieve a further 30% reduction in greenhouse gas emissions by 2013, across Australian and New Zealand building on our earlier 40% reduction. However, we recognized in 2012 that significant changes to our business, including the completion of a major merger and the approval of a new IT strategy combined with our previous emissions reduction activity (over 40% between 1996 and 2008) had meant that many of the opportunities for reductions have already been implemented and decided to make our operations carbon neutral over the life of the strategy, 2013 to b Please provide details of your intensity target ID Scope % of emissions in scope % reduction from base year Metric Base year Normalized base year emissions Target year Comment 3.1c

16 Please also indicate what change in absolute emissions this intensity target reflects ID Direction of change anticipated in absolute Scope 1+2 emissions at target completion? % change anticipated in absolute Scope 1+2 emissions Direction of change anticipated in absolute Scope 3 emissions at target completion? % change anticipated in absolute Scope 3 emissions Comment 3.1d Please provide details on your progress against this target made in the reporting year ID % complete (time) % complete (emissions) Comment D1 80% 23% In 2008, we set ourselves an ambitious task to achieve a further 30% reduction in greenhouse gas emissions by 2013, across Australian and New Zealand building on our earlier 40% reduction. Whilst we rebased our emissions profile in 2009 following a merger with St.George, the complexity of the combined portfolio made the task more difficult. In addition, necessary technology upgrades approved in 2010 saw the emissions trajectory for our data centres increase by over 25% during the target period. During the 2012 reporting year we acknowledged that our previous emissions reduction activity had meant that many of the opportunities for reductions have already been implemented and decided to make our operations carbon neutral over the life of our new sustainability strategy, 2013 to e Please explain (i) why not; and (ii) forecast how your emissions will change over the next five years 3.2 Does the use of your goods and/or services directly enable GHG emissions to be avoided by a third party? Yes

17 3.2a Please provide details (see guidance) The use of WBC s goods & services directly enables third parties to avoid GHG emissions by helping customers adapt to environmental challenges. Specific products that enable GHG emissions to be avoided by our customers include our stake in ArkX which facilitates wholesale and retail investment in renewables, our Energy Efficiency Lease (EEL) designed to help businesses fund energy reduction programs and our SunPower flexi-loan to help fund the adoption of household solar & interest free loans for employees to fund energy saving activities in their own home. A SunPower flexi-loan can enable customers to avoid emissions from electricity. E.g. A SunPower project in Augusta, Western Australia supplies approx 50% of each apartment s electricity; saves each apartment owner AU$ 346 per year & saves 45 tonnes per year of CO2 across all 18 apartments. Emissions from paper consumption used to support our goods & services are also avoided by customers through the provision of estatements. Since launching estatements in 2005, approximately 1.5 million customers have opted in, reducing Westpac s overall carbon footprint and helping save $9,101, and tonnes of paper. Applying the emission factor for paper waste (2.5 tonnes CO2 per tonne of paper), issued by the Australian Federal Government, this has contributed to an emissions saving of approximately 1, tonnes. This emission factor does not include emissions associated with paper production nor does it take into account any printing or computer use by the end user, nor does it take into consideration data storage by Westpac as it assumed that this would need to occur anyway. Other initiatives across WBC include BT implementing continuous improvement strategies to reduce WBC s environmental footprint through the increased use of online statements and reducing product disclosure statement sizes. For the year ending 31 March 2013 the holders of some 218,633 accounts opted to stop their paper statements via Online Banking, and more than 66,000 credit card statements have been stopped since we introduced credit card statement suppression on 14th July last year. Overall we have seen the number of mail deliveries made by New Zealand Post on WNZL's behalf reduce by approximately half between 2012 and In 2011 Westpac and Perenia (recently acquired by South Pole Carbon) established a partnership to develop joint primary CER (pcer) deals, where Westpac agreed to offtake pcers for sale into New Zealand and Australian compliance markets. WIB is a regular trader of CERs and ERUs in EU, NZ markets and the emerging Australian market. Westpac has also acquired offset credits via domestic project origination activities in Australian and NZ markets, for the purposes of generating ACCUs from the Carbon Farming Initiative and NZUs from forestry activities in the NZETS. 3.3 Did you have emissions reduction initiatives that were active within the reporting year (this can include those in the planning and implementation phases) Yes 3.3a

18 Please identify the total number of projects at each stage of development, and for those in the implementation stages, the estimated CO2e savings Stage of development Number of projects Total estimated annual CO2e savings in metric tonnes CO2e (only for rows marked *) Under investigation To be implemented* Implementation commenced* Implemented* Not to be implemented b For those initiatives implemented in the reporting year, please provide details in the table below Activity type Description of activity Estimated annual CO2e savings (metric tonnes CO2e) Annual monetary savings (unit currency - as specified in Q0.4) Investment required (unit currency - as specified in Q0.4) Payback period Energy efficiency: Building services Energy efficiency: Building services Energy efficiency: Building services Voluntary Energy Efficiency Retrofit Program (EERP). This program aimed to reduce Scope 2 emissions of 112 branches through lighting upgrades and the installation and/or rescheduling of timers on air conditioners, hot water units and lights. The program was rolled out over the reporting period. Other voluntary energy efficiency initiatives (Scope 2 reductions) at retail sites (branches and business banking centres), generally conducted as part of repair and maintenance or upon request. Works included lighting and air conditioning upgrades. Works were completed during the reporting period. Energy efficiency initiatives implemented at retail sites (branches and business banking centres) during the reporting period as part of the regulatory Energy Efficiency Opportunities Program. These initiatives focused on reducing Scope years 1-3 years 1-3 years

19 Activity type Description of activity Estimated annual CO2e savings (metric tonnes CO2e) Annual monetary savings (unit currency - as specified in Q0.4) Investment required (unit currency - as specified in Q0.4) Payback period Energy efficiency: Building services Energy efficiency: Building services Energy efficiency: Building services Transportation: fleet emissions though lighting upgrades, the installation and/or rescheduling of timers. Energy efficiency initiatives implemented at commercial offices during the reporting period as part of the regulatory Energy Efficiency Opportunities Program. These initiatives focused on reducing Scope 2 emissions though lighting, BMS and HVAC upgrades, installation and/or rescheduling of timers, activation of sleep mode on IT equipment, and better management and monitoring of data. Other voluntary energy efficiency initiatives (Scope 2 reductions) at commercial offices, generally conducted as part of repair and maintenance or upon request. Works included lighting upgrades, rescheduling timers and rationalizing CRAC units. Works were completed during the reporting period. Energy efficiency initiatives implemented at data centres during the reporting period as part of the regulatory Energy Efficiency Opportunities Program. These initiatives focused on reducing Scope 2 emissions though decommissioning redundant technology, resizing power factor correction units, lighting upgrades, installing variable speed drives and better management and monitoring of data. Reducing the types of vehicles from nine to four with better fuel efficiency credentials. Drivers are to use/purchase E10 provided the vehicle they are using supports the use of E10. A driver education training program is currently being implemented which includes information on fuel efficient driving years <1 year <1 year years 3.3c What methods do you use to drive investment in emissions reduction activities? Method Comment

20 Method Comment Compliance with regulatory requirements/standards Dedicated budget for energy efficiency Internal incentives/recognition programs Employee engagement Other Internal price of carbon Other Other The Group is required to identify energy efficiency opportunities for 80% of our Australian Corporate Group over 4 years (to ) as part of the Energy Efficiency Opportunities Act. The Group has a dedicated environmental budget for its properties, of which, approximately 90% is spent on energy efficiency and carbon reduction projects for property functions (lighting, HVAC, etc) and the remainder is spent on water and waste projects. Property functions account for roughly 75% of the Group's emissions (based on energy assessments completed over the last two years). Sustainability is included as a category in the balanced scorecard of all employees and performance against the scorecard determines an employee s bonus. For many employees this category is related to climate change activities e.g. advocating for or implementing emission reduction initiatives. Employees are engaged through the 'Our Tomorrow Champions' employee action program which includes invitations to presentations and workshops, Earth Hour and World Environment Day activities, as well as building specific and general information posted on the intranet and onsite. We engage with clients to encourage them to invest in emissions reduction activities for example holding environmental savings programs for SME customers. The Westpac Group includes a AUD23 price on carbon for all property-related energy efficiency business cases. This price is pegged to the Australian carbon price. The Westpac Group participates in the NSW Energy Saving Scheme and Victorian Energy Efficiency Target programs which allow us to create and sell carbon certificates for eligible energy efficiency works. The income derived from these programs is used to reduce project payback and is fed back into energy and energy efficiency budgets. Compliance with the Westpac Group targets as noted in Tables 3.1b and 3.1c. 3.3d If you do not have any emissions reduction initiatives, please explain why not Page: 4. Communication 4.1