NAB CEO Ross McEwan says mortgage rates could be linked to household issuance
Greenhouse technology could help banks “create differentiated ratings and make pricing decisions about a home’s sustainability,” he said.
“Customers are very concerned about what’s going on with the climate, and this will give every homeowner customer the opportunity to consider their own sustainability and options for making changes,” McEwan said. The Australian Financial Review.
“Then from a banking perspective, we should recognize the changes made by customers and give them a differentiated rating to encourage them to do more. “
When asked to clarify whether a “differentiated rating” meant a cheaper home loan, he replied, “Yes, over time we can see that. If they put themselves in a better position, then we should. recognize it. “
Banks are under increasing pressure from regulators and investors to understand and report on the impact of the climate on their loan portfolios. This includes a “climate vulnerability assessment” process led by the Australian Prudential Regulation Authority, which is at a high level. APRA is expected to issue new guidelines for banks on climate disclosures within the next week.
NAB’s interest in measuring household emissions shows that it envisions more sophisticated tools that can report at the level of individual loans.
The influential Basel Committee on Banking Supervision released a consultative paper on managing climate-related financial risks on Tuesday evening, which called on banks to develop and implement “a robust process to understand and assess the impact. potential of climate-related risk factors on their businesses and the environments in which they operate ”.
“Banks should continuously develop their capacities and expertise on climate-related financial risks according to the risks they face and ensure that they have the appropriate resources allocated to manage those risks,” said the Basel committee.
NAB Chief Innovation Officer Howard Silby said, “The more information we can collect about a home’s carbon footprint, the better.
The potential for lower mortgage prices if customers make environmental improvements to their homes comes against a backdrop of fierce mortgage competition and as banks should start to differentiate mortgage prices based on loan ratios. / value by offering cheaper rates to borrowers with higher levels. equity.
Mr McEwan is the first bank CEO to suggest that environmental risk factors could also influence prices and his comments come after the NAB was criticized by activists over its new climate lending policy to the oil and gas sector, which gives it the ability to continue lending to new capped fossil fuel projects.
“This project goes way beyond oil, gas and coal, it goes right into the household and that is where we should be,” McEwan said. “Our point of view is that we want to work with professional clients or individuals to be in a better position to emit less carbon. “
The alliance with NatWest Group (which Mr. McEwan led between 2013 and 2019 when it was known as Royal Bank of Scotland), CIBC and Itau Unibanco also developed a carbon trading platform which carried out its first transaction, for a Canadian customer. NAB is keen to offer the platform to its investment banking clients as interest in carbon trading increases after COP26.
ValAi was selected by all four bank CEOs as the winner of the alliance’s first Global Open Finance Challenge, first announced three months ago, which drew 91 teams from 19 countries and was also supported by Amazon Web Services.
NAB and the other banks will consider working with the other challenge winners.
These are Banyan, an American start-up that has developed a loan and risk management platform for green infrastructure projects; 9th Gear Technologies, also based in the United States, which has developed a blockchain-based business-to-business foreign exchange platform offering real-time foreign exchange settlement; and NoFrontiers, based in Brazil, which designed a product allowing immigrants to access credit and settle in new countries.
“We’re going to be looking at all of them very closely through our innovation leaders and our sales teams, and they could make a real difference to our customers,” said McEwan.