Macquarie Investments at Odds with Energy Transition Commitments: IEEFA

Despite its energy transition commitments, Macquarie Group’s oil and gas investments “are at odds” with the global transition goal of net zero emissions by 2050, according to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA).

Macquarie in October 2021 joined the Net Zero Banking Alliance (NZBA) of global financial institutions, which is aimed at “aligning their lending and investment portfolios with net-zero emissions by 2050”, according to the website of the Environment Program Finance Initiative of the United Nations (UN).

The IEEFA said that Macquarie’s oil and gas actions “directly contradict its climate commitments”. The agency found that Macquarie has almost $3.37 billion (AUD 5 billion) invested in high-growth oil and gas companies “responsible for gigatonnes of emissions from new developments in coming years”.

Oil and Gas Investments

Macquarie owns large volumes of shares and bonds in 11 of the largest global oil and gas majors, adding up to about $2.3 billion (AUD 3.5 billion), the report said. The companies are all planning “major short-term expansions representing multiple billions of barrels of oil equivalent and several gigatonnes of CO2 emissions” and have interests in fields “which could create multiples of those emissions”, it said. Macquarie also has $0.9 billion (AUD 1.4 billion) invested in smaller oil and gas companies.

Since 2022, Macquarie’s investments include a five percent stake in Beach Energy and an undisclosed contribution to the issuance of a $2.02 billion (AUD 3 billion) loan for Southwestern Energy. The firm’s investments also include $10.12 million (AUD 15 million) in financing to Empire Energy to develop the “controversial” Australian shale gas deposit Beetalo Basin, in addition to an existing 3.5 percent stake and a $7.63 million (AUD 11.3 million) finance facility, the report said.

The Macquarie investments identified in the report total $3.31 billion (AUD 4.9 billion), with a more comprehensive analysis of the firm’s exposure to upstream oil and gas companies through shares and bonds, not including loans, showing a total of around $5.2 billion (AUD 7.7 billion), the IEEA said. “These numbers are materially higher” than the disclosure of Macquarie’s full financing exposure of $0.81 billion (AUD 1.2 billion) to the full oil and gas value chain, the report said.

“The discrepancy between reported and actual exposure may be explained by the disclosures focusing only on on-balance sheet activities”, IEEFA Australia CEO Amandine Denis-Ryan said. “If so, Macquarie Group's disclosure on financed emissions appears to be exploiting a loophole in the NZBA guidelines, which do not mandate member banks to establish targets for their fossil fuel exposure through off-balance sheet activities.”

In contrast to its peers, Australia and New Zealand Banking Group, National Australia Bank, and Westpac Banking Corporation, Macquarie also adopted an emissions intensity target that does not require it to reduce its oil- and gas-financed emissions in absolute terms, the report said. The Task Force on Climate-related Financial Disclosures said it recommends oil and gas firms use absolute emissions reduction targets rather than emissions intensity targets, it noted.

Since downstream combustion emissions represent about 90 percent of emissions for oil and gas companies, Macquarie’s emissions intensity target could be achieved “simply by increasing the share of gas activities in its oil and gas portfolio”, the report said.

The IEEFA report also said that oil and gas investments are “bad financial investments” as they have “financially materially underperformed the market benchmark for the past 10 years” despite a short-lived spike in performance in the past few years. New liquefied natural gas developments in the coming years are “likely to face a supply glut combined with a flood of uncontracted volumes”, the report said.

The industry-led, UN-convened NZBA brings together a global group of banks, currently representing over 40 percent of global banking assets, according to the UN website. Members commit to transitioning the operational and attributable emissions from their investment and lending portfolios to align with net-zero targets by 2050, and to set 2030 targets within 18 months of joining, with intermediary targets to be set every five years from 2030 onward.

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