NZ Party Proposes $500,000 Fine for Banks Withdrawing Services Over ESG Targets

Coal is loaded onto a lorry. Ian Forsyth/Getty Images

Banks which refused to provide services to customers based on environmental or social concerns would face fines of up to $500,000 (US$282,000) under a proposal from one of the three parties in New Zealand’s coalition government, NZ First.

It comes after a senior NZ First Minister, Shane Jones, rallied against the Bank of New Zealand (BNZ) for announcing that it would slowly be withdrawing services from a coal mining company so it could meet its commitment to the Paris Accord.

The resources minister incorrectly claimed that banks had no right to cut services to customers engaged in legal activities.

Now, fellow NZ First MP Andy Foster aims to introduce a private member’s bill that would not only prevent banks for withdrawing services due to “woke” reasons such as trying to reduce their exposure to polluting industries, but also see them face large fines if they did so.

The banks’ would no longer be able refuse to provide their services because of the current Environmental, Social, and Governance (ESG) framework, and instead any decision would need to be made on a purely commercial basis.

Member’s bills are drawn randomly from a biscuit tin kept in the office of the Clerk of the House; those that are chosen go on to be debated on alternate sitting Wednesdays.

While MPs are nominally free to introduce a bill on any subject they like, generally these are first taken to their party’s caucus for approval.

New Zealand First leader Winston Peters (R) in the crowd at Ellerslie Racecourse in Auckland, New Zealand, on Oct. 1, 2023. Fiona Goodall/Getty Images

Foster’s proposal clearly has party support, as NZ First leader and current Deputy Prime Minister Winston Peters said in a statement that the bill “ensures fairness and prevents ESG standards from perpetuating woke ideology in the banking sector being driven by unelected, globalist, climate radicals” and “imposing woke-riddled, expensive, deadweight costs on our productive sector.”

However, the New Zealand Banking Association has defended its’ members practices. Chief Executive Roger Beaumont said that if a bank can lend within its credit risk policy and regulatory obligations, “it likely will. That is the business of banking.”

“Banks must also comply with many regulatory obligations,” he told reporters. “Should this bill be introduced, we will consult our members and would expect to provide an industry view through the parliamentary consultation.”

Global Fossil Fuel Loans

According to bankingonclimatechaos.org, in 2023 the world’s 60 biggest bank loaned fossil fuel companies $705.8 billion.

Between 2016 and 2023, Westpac loaned over $10.7 billion worldwide, National Australia Bank (which owns the Bank of New Zealand) $16.74 billion, Commonwealth Bank (which owns ASB Bank in New Zealand) $17.5 billion, and ANZ Bank $25.28 billion.

However, those figures are dwarfed by foreign-owned banks licensed to operate in New Zealand, such as HSBC which loaned $192.2 billion during the same period—though that bank now runs only a corporate banking business, having closed its wealth and personal banking business in New Zealand in June last year.

The Bank of China, which also has a New Zealand licence, loaned out $145.1 billion in the seven-year period.

According to the site 350 New Zealand, the additional emissions created by the companies supported by the  country’s “big four” banks—ANZ, BNZ, Westpac and ASB—amounts to 20.3 billion tonnes of CO2.

While New Zealand First’s coalition partners National and the ACT Party won’t have to say whether they support the bill until it’s drawn from the ballot, the government is keen to see growth in the mining, oil and gas sectors, seeing them as a key to the country’s future prosperity.

The government has introduced a controversial “fast track” approvals process for new projects.

Sheep graze in a field outside the now-closed Pike River coal mine in Greymouth on November 26, 2010. Marty Melville/AFP via Getty Images

Will the Proposal Work?

Foster’s proposal raises doubt as to its practicality. A bank could claim it refused to service a customer in climate-exposed industries based on a commercial judgment, arguing that the commitment to Net Zero meant such businesses posed a financial risk.

However, this reasoning is unlikely to justify closing deposit accounts, considering the BNZ’s threat to do so to an unnamed mining company had triggered the controversy.

Banking litigation partner Ben Upton, of NZ law firm Simpson Grierson, says banks are facing “a classic ‘damned if you do, damned if you don’t’ scenario.”

“They face growing pressure from regulators, shareholders, and the public to meet environmental commitments and reduce exposure to fossil fuels and high-emission businesses,” he says.

“However, they are also being told they have a social responsibility to support legal businesses that underpin the economy, with businesses—including petrol stations, farms, and mines—voicing fears of exclusion from essential banking services.”

In the last month six major U.S. banks, including JP Morgan, Goldman Sachs, and Bank of America, have left the Net-Zero Banking Alliance (NZBA), together with four major Canadian banks.

In contrast, Australian and New Zealand banks have so far remained committed to their climate targets, although mounting political pressure may yet see them loosen those goals.