ANZ Group Holdings Limited (ASX:ANZ)

ESG Update

← View all transcripts

Sep 16, 2021

Good morning, everyone, and welcome to ANZ's 4th Annual ESG Presentation. I'm Paul O'Sullivan. I'm the Chair of the ANZ Board. I'm also the Chair of the Board's EESG Committee, that's the Ethics, Environment and Social Governance Committee. In joining you today, I want to begin with a very important point, and that is to reinforce that your Board and the management of ANZ are closely aligned and equally focused on the importance of ESG to the company. In fact, your Board appreciates and values the leadership that ANZ has established in many areas of ESG. As the world transitions to a low carbon future and as community expectations of large companies continues to rise, we think it's essential that we have a good grasp of the ESG framework and of our evolving responsibilities. As you'll see today, ESG at ANZ consists of a number of areas. These include climate change, ANZ's own purpose and culture, our community engagement and support, dealing with customers responsibly and fairly, supply chain management and of course making sure we meet our regulatory requirements. We've noticed a significant change in the investment community in recent years. It's now clear that ESG risks and metrics play a critical role in the investment decision making process for the large majority of our investors. In fact, in the many meetings I've had with shareholders since becoming Chair last October, it's been notable that the majority of our time has been spent discussing ESG matters. What investors say to me is that they're keen to understand how ANZ thinks about ESG, how interaction takes place between the Board and management on these matters, how our considerations are reflected in our business processes and importantly, how ESG is reflected in our performance framework and in our remuneration scorecards. I really value the frank and open conversations I've had with so many of our investors, and I look forward to continuing them with you in the future. So again, thanks for joining us today. And now I'd like to pass over to our Chief Executive, Shane Elliott. And good morning, everybody, and thank you for joining us at our virtual presentation today. I'd like to acknowledge that I'm connecting from the lands of the Wurundjeri peoples of the Kulin nation. I also acknowledge the traditional owners of the various lands in which our attendees are joining from today. Let me firstly say before we begin the session that while 2020 was a difficult year, 2021 is proving to be just as challenging but in very different ways as we continue to deal with the COVID-nineteen pandemic. We're seeing signs of greater economic disparity, impacts on workforce participation, particularly for women, further stresses with respect to housing affordability and differing stresses across the region as countries manage COVID differently largely due to their financial capacity and levels of social infrastructure. While in Australia and New Zealand the economies are generally holding up well, it's still patchy. Average economic data is generally positive. However, ongoing operating pressures for small businesses and higher levels of household debt, particularly for 1st homebuyers, are of concern. So on to today's session. Integrating ESG and purpose into our strategy has created an opportunity for ANZ to better serve customers and generate long term shareholder value. And it's appropriate we hold ourselves to account publicly with regards to progress and so this is now the 4th year we're holding a dedicated ESG briefing. Over the past few years we've covered a lot of ground in particular our governance structures, product suitability, remediation, climate change and social impact. Now last year we had a particular focus on how we were supporting people, customers and the broader community through COVID and that support work continues. Now there's much we're proud of but many challenges ahead. And for today's session, we'll focus on the significant opportunities we see in better aligning ESG and strategy to deliver even more integrated market approach that will drive long term value by supporting the multiple transitions that we face: economic, technological, environmental and social. So today we'll discuss our alignment of purpose in ESG with strategy and outcomes, how we drive value through people and culture, where we are with environmental sustainability, both as a risk and an opportunity, and finally how we continue to strengthen our focus on financial well-being and how that will drive better outcomes for the community and for ANZ. And Kevin Corberly, our Chief Risk Officer, will then discuss our integrated risk management approach with some specific updates on risks associated with people, climate, cybersecurity and anti money laundering. Now the banking sector has faced a challenging environment in recent times through the GFC, the Financial Services Inquiry, around 20 other parliamentary inquiries and of course the Royal Commission. And these moments have brought about the need for the banking sector to change. And at ANZ, we've embraced this opportunity and it's enabling us to build a better bank, providing stronger outcomes for customers and a financially more sustainable business. As a result, we've spent much of the last 5 years embedding our purpose, ethics and values into our strategy and the way we make decisions. We've also further strengthened our governance processes. In 2016, we were the 1st large Australian bank to broaden the remit of our Governance Board Committee and establish a dedicated environment, social and governance committee. And today, we know this is our ethics, environmental, social and governance board committee. And we're still the only one of the big 4 banks in Australia to have this dedicated structure, and it is having a material impact on the strategic decisions we make about who we bank, how we behave and what we care about. But to keep improving, we recently undertook a benchmarking exercise looking at peer banks around the world and leading Australian corporates. And while there's always more to learn, it reaffirmed our practices are robust and broadly aligned with those peers considered to have good ESG governance. But it is a fast changing space and we remain vigilant and connected to leaders in the area so that we can understand emerging trends and opportunities, for example, the emerging interest in biodiversity. Now to how our purpose and approach to ESG is helping us deliver on our strategy and creating value for our customers and ultimately for our shareholders. And a great example of this, which I'll elaborate more on later in the session, is the work we do to support customers in sustainable finance. During the 1st three quarters of this current financial year, we participated in $91,000,000,000 of sustainable finance transactions across 55 deals in Australia, New Zealand and in our international business. And many of these sustainability linked transactions are firsts such as our loans for retailers Coles and Kathmandu, a bond for Wesfarmers and a bond for Singaporean Infrastructure Development Company Sabana Jurong. These deals and of course many others highlight the enormous opportunity and the upside in supporting environmental sustainable development. And ANZ's strong proposition in this area, linking in our ESG approach and priority area of environmental sustainability coupled with our leading regional footprint is helping us carve out a leadership position, creating value for customers and for shareholders. Now our group strategy is unchanged and we remain focused on 3 important areas: helping people save for, buy and own a sustainable, livable and affordable home helping people start or buy and sustainably grow their business, and helping customers helping companies rather move goods and capital around the region. But at the heart of our goal to build a better ANZ is a focus on building the financial well-being of our customers, whether they're retail, small business or institutional. We've developed some financial well-being principles to guide this work such as spending less than you earn, saving for a rainy day or investing in things that grow. And those help our customers make better financial decisions for the future. To deliver our goals, we need to have a purposeful, engaging and attractive proposition supported by the right products and services that meet our customers' needs along with safe, simple and efficient systems and processes. And as Australia's leading provider of banking platform services to other financial institutions, we also need to invest more in flexible digital banking platforms, extending our reach to other banks, fintechs and non bank service providers to drive real economies of scale for us and enabling them to serve their customers well. It's also about having collaborative partnerships that unlock value, connecting with fintechs and other partners like Worldline and through our own ventures and incubator business 1835i, where we invest in and partner with leading innovators like Lendy and Airwallex. And it's the relationships we have with our community partner organizations to deliver financial inclusion programs, plus the work we do to support not for profit partners to deliver more suitable housing opportunities in the market. And lastly, there's our values led people and we recognize the need to attract and retain the best people who can deliver on our strategy. And ultimately, it's an amalgamation of everything we do. And when the elements are added together and when we get them right, our customers will notice a difference and we'll deliver better outcomes for shareholders. Finally, it's really important to mention that to close out this loop, we've developed a range of metrics. Linking purpose and strategy together means we can now draw a line down to a suite of people, customer and brand metrics in our group scorecard with both internal and external targets and that ensures we've got a clear set of goals and measurements to track progress. It also provides key inputs into people management systems including remuneration. And now onto a few specific updates and firstly I'll start with people. Earlier this year we developed a new group wide diversity and inclusion strategy. Now we've had a D and I strategy for over 15 years, but the new strategy was co created with employees from all levels and geographies, including those from our employee networks. It's also been endorsed by our Executive Committee and the Human Resources Committee of the Board. This year we introduced a new question in our annual My Voice staff engagement survey asking if people feel like they belong at ANZ. And the overall score was 81%, something I'm really proud of. As we know, an inclusive culture is one of the most critical drivers of employee engagement. Now another area of focus, of course, is achieving gender balance across the bank. And we had a target to achieve 34.4 percent of women in leadership by the end of financial year 2021. And we're currently sitting just above this at 34.8%, which is a really terrific result and the fastest annual improvement we've seen in 5 years. And with a view to increase this further ANZ has signed up to Hester's 4040 initiative and we're proud to be the only Australian bank amongst the first ten signatories. Having women in an executive roles, especially in line roles with P and L accountability is critical and this is where the majority of CEO and CFO appointments are drawn from. And not only is my leadership team 40% female, but of the 4 line roles that sit on my team, 50% are held by women. And this has really strengthened our decision making and the way we consider and manage risk and opportunity. So I'm pleased with our progress in building a diverse leadership team at ANZ and I believe our bank is a place that grows and fosters great talent. Another key part of our diversity and inclusion focus relates to First Nations people And next month, we'll launch our 5th Reconciliation Action Plan. The new plan focuses on improved financial well-being, providing employment and career progression, building capacity of its Aboriginal and Torres Strait Islander businesses and understanding the importance of cultural heritage. And it's got strong support amongst our employees as well as the board and my executive committee. In New Zealand, we've appointed Carleen Everett as our new head of to our Maori strategy in February 'twenty one to help ANZ play a stronger role in building economic participation for Maori and increasing the cultural capabilities of AMZ. The 2nd key area I wanted to discuss today is the work we're doing in environmental sustainability, helping drive sustainable outcomes for customers and the community. Our commitment is to support households, businesses and financial practices that improve environmental sustainability. And frankly, it's one of the most exciting opportunities for us and we're well placed to shape and support the required economic transition. Too many people consider our policies in this area in the negative, the things that we won't do. And while that does have its place, we're focused and excited by the things we can do and that we will do to finance the transition required across the region. Our sustainability strategy is supported by our climate policies and programs. For instance, our climate change policy, which we update regularly, sets out how we think about and respond to both the risks and the opportunities. It outlines policies in relation to thermal coal exposures for example along with our own operational emissions targets. But it also focuses on the important work we do with our large institutional customers to help them transition. And this work is going well and we continue to see their plans advancing. What's also really exciting for us and what's driving our future focus are the significant transition opportunities coming from a low carbon economy. And as mentioned earlier, our sustainable finance team is leading the way in servicing customers in this area. So, so far this year, we've transacted what it's previously taken us 5 years to do, and we're also outpacing global growth with our market share growing significantly. Sustainability trends in the economy more broadly are also presenting us with commercial investment opportunities which we're actively pursuing. And the key areas of interest for us include support for electrification of the transport supply chain, facilitating new technologies, commercialization of hydrogen, financing energy efficient buildings and assisting customers establish and develop their own transition plans. Now to succeed in this area we'll be investing in our business and developing our people to have the right culture and mindset committed to sustainability in building out our climate risk expertise and having better data and technology to develop insights and track emissions and in strengthening our industry knowledge and product expertise. And we're committed to delivering on our goal to be a leading environmental sustainability bank seeking out business opportunities that are aligned with our purpose and our strategy. We don't want to just be a bank who does sustainability well but rather a sustainability led bank. Now lastly, I wanted to touch on the work we're doing in financial well-being. And one of the ways we're working to improve the financial well-being of our customers is giving them the tools and the insights that can help positively change behavior. We know that customers with a savings goal have a savings balance twice that of a customer without one and that they save nearly twice as fast as they did before setting the goal. Through the ANZ app, we're helping our customers save through insights, nudges and goals and it's really exciting. As in setting goals, customers are sharing with us what's important to them, saving for a house, a holiday, a car, a pet or to start a small business. And by ethically and responsibly using this insight, we're better placed to coach and advise our customers on how they can get there faster. Our financial well-being work is also about the partnerships we have with government and community organizations to support a broad range of people who may not be customers. So this includes the financial education program MoneyMinded, which reaches tens of thousands of people each year. Our partnership with the United Nations Development Program to deliver MoneyMinded to women in rural areas in 5 Pacific Island Countries Fiji, Kiribati, The Solomons, Tonga and Vanuatu. In fact my last overseas trip before COVID was to visit our team and customers in The Solomons. And so I've seen firsthand the impact that these programs can make. It's also our support for underrepresented groups such as refugees and asylum seekers to have access to employment through programs like Given the Chance, which we offer in partnership with the Brotherhood of St. Laurence. And also with the Brotherhood and the Australian government as co funder, we've supported more than 50,000 people to build their savings and financial well-being through our matched savings program, Saver Plus. Participants in this program have saved over $26,000,000 since 2003 and we're really proud of this work and what we do to support the broader community. Now this brings me to a close. And I hope that you take from today that we have a clear sense of purpose, a strong values led and people focused culture and an integrated approach to ESG that is supporting the delivery of our strategy. And in the area of environmental sustainability in particular, that there's a huge business opportunity for us if we can get it right. So with that, I'll hand over to Kevin. Thanks, Shane. Today, I wanted to talk to you about our approach to non financial risk management, including how it fits within our broader risk management framework. I'd also like to touch on some specific ASG risks that we're actively managing. First, on our overall approach to risk management. At ANZIG, we believe risk is everyone's business and is part of the way we work and think. We want a risk culture where our people demonstrate the right risk behaviors, have clear risk roles and responsibilities and are enabled by the right policies and processes. Taking risk is something, as a bank, we do every day. If you bring it back to the basics for a moment, customers place money on deposit with us, and in turn, we lend that money out to other customers or borrowers. This requires us to make a risk assessment on the borrower's ability to repay so that we can protect our depositors. But risk comes in many forms today, and non financial risks and ESG risks are increasing. The way we manage these is no different to any other risk. Within our board approved risk management framework, we have identified the full spectrum of material and evolving risks ANZ is exposed to and then set out our risk tolerance for these risks through our risk appetite statements. Essentially, these statements outline the degree of risk we're prepared to accept to achieve our strategic objectives and plans. Under that, we have a series of policies and procedures to guide our staff, together with controls to mitigate risks as well as systems that monitor compliance. So whether the risk is financial or non financial or ESG specific, we apply a similar framework, but varied based on the type of risk and what our appetite and tolerance levels are for the issue. In terms of key initiatives and developments made in this area, late last year, we reviewed our risk appetite statement metrics to make sure our Board Risk Committee had oversight had appropriate oversight of our non financial risks. The review concluded earlier this year with the committee approving a collection of over 36 metrics and indicators with some new and amended ones, including availability of critical technology systems, resolution of customer disputes, employee turnover and lost time injury frequency rate. The increase in metrics and indicators is up from 12 prior to the review and demonstrates the growing importance of non financial factors in helping inform decisions within our bank. As part of the review, we also developed and launched a new tool that streamlines how we capture and report against the risk appetite statement metrics, reducing the time it takes from weeks to days. We also developed a purpose built dashboard to support the proactive management of our risk appetite using trend analysis technology. These changes have provided our Board Risk Committee and management with greater visibility and control over our non financial risk appetite. In addition to this work, for the first time, we conducted an internal risk culture survey in May this year. The survey gathered the perceptions of target risk behaviors from over 24,000 staff across ANZ. Pleasingly, the results were really strong with over 80% of staff expressing a very positive sentiment for ANZ's risk culture. We've done a lot of work over the past 3 years to encourage a speak up culture, and the responses to that survey confirmed that our people feel they can speak up and challenge each other respectfully if they see unethical behavior. Now to a few specific ESG risks. 1st, climate risk. We know our customers are already transitioning to a low carbon future themselves. Some have clear plans to achieve net zero businesses by 2,050. We are working with our customers to better understand what they're doing. At the same time, we're seeing significant shifts in the reduction in the cost of energy alternatives aided by new technology. These two things combined, along with some uncertainty around demand for some of the natural resource commodities and questions over price, mean we are actively managing these risks now. And we are managing any identified risks in this space in accordance with our risk management framework as I previously mentioned. In addition, regulators in almost every market we operate in are talking to us about how the transition is elevating climate risk for banks and other financial institutions. As APRA has publicly said, a prudent institution needs to consider the financial risks and opportunities of climate change and to manage any identified risks, which is what we're doing. The second area is the risks associated with our people. We worked incredibly hard last year to support our people and get them to work safely from home as quickly as possible. Looking after our staff continues to be a priority and something we are acutely alert to as many people are still in lockdown across Australia and New Zealand. And our staff in the Philippines and India have been working from home since March last year. This undoubtedly brings up issues around mental health and physical well-being and risks associated with fatigue and burnout. For many, being away from the office and not knowing when they can return is driving a sense of angst and uncertainty. We've continued to focus heavily on helping our people build and maintain resilience to help them through the pandemic. Among the ways we're looking after our people is through our Healthy Me digital app, which was launched last year and offers health and well-being podcasts, webinars, articles and other activity. Our employee assistance program, EAP, which is actively being utilized by those who need support services, and we've seen utilization in both Australia and New Zealand increase. In Australia, we have commenced a rollout of a customer counseling support program within EAP for customers experiencing emotional distress. Also, employee webcasts with local medical directors and psychologists on vaccination queries and dealing with COVID-nineteen and also the extra assistance we've provided to help vaccinate our staff in some key locations. For example, vaccination hubs in Bengaluru in India and in Sydney, a workplace vaccination pilot, starting with the 12 affected local government areas and now extending across Greater Sydney. In Fiji, 99% of our staff are now vaccinated. We've played a role in educating our teams and supporting access to the vaccines. Finally, the other issue we're working on is the future of how we work at ANZ. We've developed a how we work model, which has been designed around listening to our staff and seeking feedback about how they want to work in the future. Based on feedback, a small percentage will remain remote working first. Some staff will remain workplace first, and the vast majority will be blended with a mix between home and office. Maintaining the culture of ANZ in a blended or hybrid working environment is going to be crucial, and we are mindful this is a potential future risk to be managed. That said, I'm really pleased we can enable our staff to work flexibly in a way that works for them. Lastly, there's cybersecurity and anti money laundering. We take the security of our bank, our customers and our customers' information very seriously. It's why we have a range of recognized industry practices, technologies, processes and defenses in place. Cybersecurity threats continue to be significant, especially in the context of COVID and the shift to digital banking and remote working. Today, we're blocking around 12,000,000 malicious e mails a month. And in fact, last month, that peaked at 17,000,000. Pre COVID, in October 2019, that number was about 4,000,000. So it's now 3 or 4x greater. But our 20 fourseven secondurity operation centers defenses and mitigation capabilities help combat these threats and continue to help keep us safe online. On anti money laundering, we have a clear obligation as a major financial institution to ensure our systems and payments are used appropriately. We've invested significantly in enhancing data analytics capability for the bank in recent times. For instance, we created a central financial crime data hub and intelligence ecosystem that uses a number of analytical tools, including network and link analysis capability. Using these tools, we can better detect syndicated crimes and demonstrate the big picture view of criminal activity. And also dynamic algorithms, using agile monitoring and detection solutions to detect customer behaviors and variations, which have resulted in targeted and enhanced outcomes for AUSTRAC and police investigations. It's a collaborative effort, and we will continue to invest in this area to help protect our customers, staff and the community. Lastly, before I close and open for questions, what I've spoken about today is essentially a report card for how we're managing risks. I'll finish by outlining some of the emerging risks that we're watching closely. They're ones that also align with our ESG priority areas. In environmental sustainability, biodiversity is a new and fast evolving area of interest. And while we'll have more to say on this as the area develops, we do recognize a link between climate change and biodiversity loss and are committed to including a greater future focus on biodiversity as a result. In the area of financial well-being, the continued rise in cyber scamming is worrying, especially when we see those who are vulnerable in the community being targeted. So this is something we are alert to and are working closely with our vulnerable customer, fraud and cybersecurity teams to keep in front of. In the area of housing, the economic disparity emerging as the COVID-nineteen pandemic continues is putting people under real stress. And for some, the dream to buy a home is slipping further away as house prices continue to climb. We won't know for some time how this increasing social and economic divide will play out over the longer term, but it's something we're closely monitoring. With that, I'll hand over to the operator for the opening of questions from our ESG and analyst community. Thank you. Thank you. Your first question comes from Andrew Triggs from JPMorgan. Please go ahead. Good morning, everyone. Thanks for the opportunity to ask a few questions on AC matters. First question just on Page the Slide 16, which has the engagement with the top 100 largest emitting customers. Am I reading this right to suggest that around 70% have plans with respect to governance on that issue and less than 60% on targets and long term plans. And what do you think of that sort of progress on that sort of key facet of your plans? Yes. I mean, you are reading it right, Andrew. And I think so just I think it's worth just giving a bit of context here. Of those those are the they're not necessarily our largest exposures. These are just the largest emitting customers that we deal with, right? So we might have a relatively small exposure to just a large emitter. So that's first. Secondly, it is a global portfolio. So that 100, I can't remember, about 40 ish or something like that are actually based in Australia. I think the majority are international. So it's not an Australian list. That's also important. But yes, the basic logic that you apply there is correct in terms of the current state. The good news is what we're really interested in here is progress and the fact that these that there's continuing advancement of that portfolio of emitting customers. And we are pleased with the progress and we can actually see over time that this is a generally improving area as more and more companies become interested in the area and actually put together plans, targets and actions to actually make a difference. Thanks, Jenny. Just another point of clarification. Does the chart also imply that you haven't engaged yet with about 15% of your of those 100 largest emitting customers? Shane, can I just on that one? Andrew, the day to day areas as at sort of our disclosures last year in 2020. So there has been some change since then. And what I would say is that we have spoken to all of our top 100 customers as of yesterday. So we'll have when we release the results in a couple of months' time, we'll have more up to date information on those customers. But we've now spoken to all of them. Okay. Thank you. Yes. And maybe just a follow-up question. Just in terms of, I guess, major banks appear to have firmer restrictions that you talked about your approach to the E part of ESG being equally about what you can do or what customers can do in encouraging sustainable finance, but also what customers can't do. The other 3 majors seem to have more stricter restrictions, if you can't hold that, on what can be done in terms of thermal coal mines and coal fired thermal generation. Is there any have you given any consideration to moving a little bit more in line with those peers, especially given the more coal exposure now seems to be quite immaterial? Well, first of all, I kind of reject that actually. I'm not sure that's true. And I think there's a difference that we actually do what we say we're going to do. And so I think we've actually shown a willingness to be bold in terms of making decisions. And actually, when we do our analysis, and we do obviously, and not just against the locals, I'm not sure that's the right benchmark, we look globally. And we do line up our policies and statements and commitments. And I think we benchmark incredibly strongly, not as the leader globally, but we're certainly in the sort of more forward leaning pack in terms of the commitments, etcetera. And I think more importantly, I mean, it's important to have goals, obviously, but it's more important to walk the talk. And I think we have shown our willingness to take bold decisions in terms of what we will and won't do going forward. Having said that, Andrew, I think it's fair to say that the whole area of climate policy in many ways needs to be written in pencil because it's continually changing and evolving. And so we'll be issuing an update soon to sort of reflect our current thinking and our current commitments around that and you'll be able to then hold us to account on those new goals. But clearly, we take into account what others are doing globally and where best practices and what and I think we hold ourselves to a pretty high bar. Andrew, the other thing I'd add to what Shane said sorry, the other thing I'd add is that we've been talking to our customers for a number of years on this. So our policy as it relates to thermal coal is pretty clear. We have an exit date of 2,030. And that aligns actually with a number of banks with all the banks major banks here and also with a number of major banks globally. And those conversations have been such that we've been talking to the customers about the financial risks of climate change as I said and our position is actually consistent with many of those customers. And as Shane alluded to for those instances where customers have plans that are different from ours, We've been pretty clear that we've helped support them find alternative financing. So we're not cutting and running for want a better way to describe it. We are having the conversations and we're helping them find alternative arrangements. And just to follow-up on the sustainable finance side of things on what you can do, I guess, whether you think your market share sits on that side of things, Shane? I'm glad you asked that question, actually. So it's pretty exciting. So first of all, we have to say it's fast growing, but in the scheme of global finance still relatively small. But the numbers are growing really, really fast. If we take all the sort of the global issuance around sustainable linked finance transactions, our share is around 8% globally. And so and importantly, Andrew, it has been growing. So we've been growing faster than the market. And that's why we're quite excited about the opportunity. Look, who can say, but I would imagine the growth rate is going to be sort of geometric for quite a period of time. And we feel we're in a really strong position and have a really strong sort of market proposition in terms of our brand. And that's our commitment around sort of ESG and walking the talk and actually capability. Like, it's no coincidence, our leading position in DCM capability, for example, or syndications is obviously really core to be able to execute on this opportunity. Thank you. Thank you. Your next question comes from Alison Ewing from Regnan. Please go ahead. Thank you. And thanks again for a very helpful question. I had two questions. The vessels on remuneration actually where A and M made some really significant changes to its approach right throughout the organization. So my question is about kind of outside of the KMP. I wondered if you could share any detail on where this has been whether it's really driving the intended behaviors and whether there's been any unintended outcomes or consequences as a result of that change. And my second was related to the STG. So I thought it was really interesting to see you in the pack include how your financing aligns with the STGs. I wondered whether you had undertaken the kind of pull turn exercise to understand what if any of your financing might be undermining the achievement of those goals. Yeah. And why they're looking through that lens provides any additional insights relevant to your broader decisions around this appetite? Yes, that's a great question. I'll let Kevin make some comments on the second point. I'll start. But in terms of so thanks for the question on remuneration. So first to acknowledge it is early days. I mean we announced what our program is called reimagining reward. And for those of you on the line not familiar with it, I won't go through all the details. But essentially what we did is we've moved away from an individual at risk pay philosophy, which our industry has followed for many years where people got individual bonuses based on contribution and etcetera to more of a group base. So we have a group performance dividend. So 85 ish percent of our people, we basically increased their fixed pay, reduced their reliance on at risk pay and the only at risk pay they get is they share in this group performance dividend. And it's a while there are various tiers of it, it's like a dividend. We announce a payout ratio and staff either they get x percent of that target all the same. And it's really to encourage group performance, collaboration, to remind people we are in this together. So that's it. And then the final 15% still have some. They all participate in that group performance dividend. The only people who don't participate in that are me and my direct team, but all staff participate in that. But there's a small group of people who in addition to that have at risk pay. And the reason we do that is because we do see the value of it because those are the people whose decisions that they make have very, very serious consequences, positive and potentially negative on the community, on our customers and on the prudential soundness of the bank. So that's why we have this mixed progress. We launched it, this will be our 3rd year. So I do and of course COVID last year was a difficult year in general, so I wouldn't want to claim victory. I think though the signs are very positive and I can give you some examples. It has taken away this tension or the sense of competition because obviously in the previous model it was all about people it was essentially a bit of a zero sum game, there was a certain amount of pull and either you either got it or somebody else. So there was a sense of competition which wasn't healthy and it sort of encouraged a sense of my team versus your team or my contribution versus yours. So this has really started people to think more broadly about impact and we can see that in the conversations we have with people. So early days, positive signs. Your second point on remuneration is in our scorecard as a group how we determine that group dividend or how we determine at risk pay for people like me and senior people. The scorecard is balanced. It has a risk multiplier to it. That's the first thing we look at. We look at people, customer and financial discipline. And there are ESG type measures right throughout that scorecard. For example, things like diversity, but also the progress we're making with the 100 largest emitters. So we do have a line from our philosophy and our approach to ESG all the way through to that scorecard and that's only getting stronger. And I put up one of the slides and I can't remember what page it was, the one that sort of had the circle wheel on it sort of trying to describe the integrated approach. What we're doing and I mentioned in there, I think it's on Slide 8, what we've taken there is actually we're just using that as the core to actually strengthen even further the linkage between that business model and the metrics we use to remunerate people and get some balance into it. So I think there's some positives. Do you want to talk about on the second question? Yes. Alison, thank you. It's actually really interesting question. We haven't done an SDG reverse analysis yet. I must say I wouldn't mind going away and having think about it and talking to the team. It's actually probably a pretty good suggestion. So thank you for that. Yes. Actually, Rob, you've got your one to If there's any update on what you might be doing around physical risk on climate change? Physical risk on climate change? Look, we're obviously continuing to do significant amount of work on all of the elements of climate change, whether it's physical transition, whatever. So it's a key element of our climate change policy. And yes, we're continuing to do a lot on it. Thanks. Thank you. Your next question comes from Lou Capparelli from UniSuper. Please go ahead. Good morning all and thank you for the opportunity. Shane, perhaps for you and then I've got another one as well. But the first question I have is great to see the initiatives you're doing in affordable housing. And as a parent of kids who are going to get into housing at some point, anything you can do there is welcome. But I'm just wondering, I mean and it's not up to you to solve the sort of affordable housing issue, but whatever you can do is helpful. But I'm just curious to know to what extent your initiatives are you prepared to sort of incur some let's call it hurt money because I mean you're out there, you need to make a buck and I can't see how any initiatives you do might actually have an impact on the bottom line. And I'm just wondering to what extent am I framing the issue correctly and to what extent you're prepared to incur a hit? Yes. I think that's a very fair question. Well, we are. And I don't and again, it's about timing, right? It's like anything we do, it's not a lot different than the work we did in building our capability and sustainable finance. In the early days, you do take a hit. Your resource CCs up, you don't cover your costs, you learn, you take a better risk. And so if you took a long term lens, so our approach on affordable housing is working with partners because we can't do it on our own, but working with partners and a great example here in Australia is a company called Assemble. So we're working really closely with Assemble who is really working on commercial models for affordable housing. And we can use our insights and contribute to the innovation there and how do we structure something that can work and we for example working with the super industry as well as an investor in there and are there different financial models as well as different housing models? And so, a, we put our best people into that. And then when we think about how we finance, I'll just use that as an example, a development from assemble, yes, we have to take a slightly different risk appetite to it. And part of that is, if you will, early stage investment approach to say, hey, so we've put aside a reasonable amount of capital and funding that we have targeted to say, hey, we're willing to invest this into this area of affordable housing and we understand that the returns won't be the same as we would get elsewhere, that there might be a slightly different risk appetite. But that is there because we believe in the long term prospects of that as a sustainable business model and we want to be a partner early on in it. So yes, now we can discuss whether we're taking enough risk or not. I would say at the moment, mean I'm personally pretty heavily involved in this through our own ERBC committee and we look at these. I spent time with the team at Assemble for example and others and we've got some great examples in New Zealand as well by the way. I would say at the moment our appetite for that is larger than the supply of opportunity. And so what I mean by that, if I stand back and think about our resources, our capital, the sort of funding we can contribute to this, we have more appetite than we can fill at the moment. And I don't think that's because we're being difficult. I just think it's a very, very early stage emerging market. Now, hey, look, in the last 3 years we've been looking at it's changed dramatically. And I imagine it will be a bit like sustainable finance. We're probably going to get some really geometric growth. But there's some real projects starting to take shape now, and we are excited about it. But yes, we're willing to take a little bit of a financial hit in the short term because I think in the long term it's A, it's the right thing to do, but I actually think there's a massive business opportunity for those early stage investors in this area. And can I just ask as a follow-up to that before my next question? Are you doing anything in, let's call it, the more sort of mainstream space in the sort of secondary housing market in terms of helping young people that sort of finding saving 20% for a deposit to avoid that sort of luxurious lenders mortgage insurance. What are there any initiatives you're doing there? Yes. Although, again, I think we're still early stage. So for example so you're right. So we can talk about the supply side. We talked in terms of helping our customers get to that savings point, that was some of the comments I made there before. So we've had so we set up an ability within our app so you can set a goal and say, hey, I want to save for something. And we know, as I mentioned in the speech, just the act of setting a goal rapidly improves your chances of actually saving. So you get there faster and bigger by doing so. So we've enabled that to do. And we now have I think it's something like 450,000 goals have been set up by our customers. And as you can imagine a lot of them are about first home buyers. And so what we're able to do that act in and of itself will help them get there faster. And then what we use is those nudges we talk about is to remind people, is to send people, hey, you set a goal, you're a little bit behind, have you thought about this, have you thought about that? There's a lot of exciting ideas in that area. We're at the very, very baby steps, pretty basic stuff, but we've got some really great initiatives of how we can enhance people's ability to save. Because if I just stand back and I know this wasn't your question, but I think it's an important point. Kevin and I both talked about the emerging disparity in housing that we can see that. And if anything, COVID has made it worse. I mean, house prices have risen, I don't know, 20% in Australia and New Zealand over the last year. Well, we know incomes didn't rise 20%. So it doesn't take a genius to figure out affordability is starting to be stretched. And of course, that impacts 1st home buyers the most. And so there is this emerging issue here. As a bank and as a prudent lender, we need to make sure that people are not taking we need to be responsible in not taking on too much debt, yes? So we need to not loosen our credit standards because that's not helping anybody in the long term. But on the other hand, we also have to accept we need to encourage people to get there faster in terms of their deposits as you mentioned. Now in the past, what, 5 odd years, we've seen this big rise in things like parental guarantees and other things or even and not just guarantees, but actually friends and family sort of assisting on the deposit side. I'm not sure that's sustainable. I'm not sure that's the solution in the long run. And so again, financial innovation but in a responsible way thinking about helping people get in. So the sort of rent to buy opportunities. And again, we're working with providers of that to make that a financially viable and a sensible responsible thing for a first home buyer to do. So I think there's a lot of opportunity, but we're at early stages. That's great. And just a final question and it's further to the earlier question around thermal coal and exposures. Are you considering as part of your overall approach like setting some sort of limit on fossil fuel exposures more generally? And I'm curious to see I think there's a slide in today's presentation that says you've got $6,000,000,000 or $7,000,000,000 invested in oil and gas. And to what extent you're considering your position there in terms of stranded asset risk, etcetera? Yes, of course we consider it. We haven't made a decision on that. I think it's a very reasonable question and I think it's a thing and I can just tell you it's under active consideration. And again, I know you know this. I mean one of our challenges here is to say are we better to how do we think about the fact that we may well bank a fossil fuel company who's completely committed and has a very, very credible plan to net 0? Is that a better position than banking a non fossil fuel company who may well be emitting who has no plans or nothing credible to do anything about it. Now I'm using 2 extremes here. So I know you know it's not quite as simple as just saying we won't bank fossil fuels. But I think the point about yes, approach, whether there's caps, whether there's some more sort of formal way we can share our risk appetite around that absolutely is under active consideration. And I think you've seen our climate change policy evolve over time. And that's why I sort of made that comment. It is written in pencil because it will continue to change and you're going to see a new version of that soon and it will continue to strengthen because that's what the community demands of us, greater clarity and further strengthening and that's what really importantly our shareholders and frankly also our customers as well. So it's actively discussed. Thanks very much. Thank you. Thank you. Your next question comes from Richard Wiles from Morgan Stanley. Please go ahead. Good morning, Shane. Hi, Richard. I just wanted to follow on from Lou's questions on housing. There's been a lot of focus on financial well-being today. You've also talked about the disparity on housing affordability. And I think at the outset, you said higher household debt for first time buyers is very concerning for you. Yes. So that Shane, that left me to 3 questions. And I think it goes more to policies in the country rather than efforts from a bank like yours to get people to save. Okay. So the first question is, do you think housing sustainability should be part of the mandate for the RBA in the same way that it is for the RBNZ in New Zealand? Secondly, do you think government, central bank and regulatory policies in relation to first time buyers are actually home buyers are actually fueling the buildup of debt and undermining financial well-being in this country? And thirdly, do you think that there is too much focus from the RBA on keeping rates at emergency levels when it discourages people to save and actually makes their savings goals harder to achieve. I mean, I'm completely Okay. Yes. So you really basis points on a term deposit isn't going to help you get to your savings goals. Yes. Boy, so you really want to put me in harm's way here, Richard? Thanks for those. Now look, seriously, I think, first of all, on the question about housing and the RBA, I think there is a fundamental difference here. And it is that the RBNZ has a very different remit and is essentially a combination of APRA and the Reserve Bank. So I think the policy setting in New Zealand, I'm not sure it's appropriate to lift and shift that and say, therefore, the same should be here. I think the Council of Financial Regulators, I think the regulatory system does have a perspective and a role to play in terms of housing affordability. And obviously the way they execute that is through the various arms of that regulatory structure. So I do think and look, I know in speaking to or hearing from Reserve Bank and the various regulators, it is something they consider in the broad, whether that means they action it through the RBA or as opposed to APRA or ASIC or something, that's something different. So I think there's a difference there. In terms of whether some of these settings are contributing to the issue, that may well be the case, but I sort of stand back and say this is not an Australian unique position here. I mean if we look around the world in almost every developed market or market we would consider similar in structure whether it's Canada, U. S, Singapore, most of Europe, New Zealand, the U. K, are suffering from very, very similar issues. And they all, while there's some similarities, have different regulatory structures and different policy settings. But what we are seeing is asset price inflation, and it's not exclusive to housing, but housing is part of it. So I think it's more fundamental than just Australia led issues. Clearly, your point about do low rates contribute to the issue? Yes. I mean, I think that's a fact. I think and to both the issues you talked, yes, it makes harder to save for a home and yes, it encourages increased levels of debt because of you can afford it, if you will, because of the lower servicing costs. And that's why I think and again it is a thinker, that's why the Council of Financial Regulators and the RBA have made comments about perhaps the need for macro prudential intervention to offset some of those issues. So it's a complex issue. I think the point from a bank's perspective and I appreciate your question wasn't really about the bank but more broad policy settings, but the issue for bank is how do we continue to grow and help our customers achieve their objectives of home ownership because we know home ownership is one of the single best things you can do to improve your financial well-being but do so responsibly and make sure that we're not allowing our customers to get into harm's way in terms of the level of debt they're taking on. So I would like it's complicated and I think we're confident we've got our risk settings right for that. And it's not a time, I don't think, to be pushing out the risk envelope in terms of particularly around first home buyers or highly indebted borrowers. Thanks, Shane. They're not easy questions to answer, but thanks for your perspective. Thank you. Thank you. Your next question comes from David Wiedemker from New South Wales Treasury Corporation. Please go ahead. Hi, Shane, Kevin and Paul thanks very much for the presentation. Just continue on that theme around I guess affordability and one of the issues is equitable access to finance. And I think you mentioned at the outset Shane that women were more affected by the economic conditions. And so can you perhaps elaborate on ANSI's approach to supporting female customers. And also I guess the disruption that we're seeing in the industry suggests that perhaps more that the incumbents can do to provide more equitable and better value access to finance. And so delivering on your goals to support financial well-being, credit card products clearly we talk about first time buyers and ability to get into housing products that got a lot of credit card debt and they're trapped in a cycle, maybe that's impacting. So I thought perhaps I'd ask you to put on some of those issues. Yes. Well, thank you for the question. There's a lot in there. So just again to sort of reframe what our comments were, I think it's clear from the statistics that while the unemployment rate has fallen, it has largely fallen as a result of falling participation in the workplace. And if you look at and if you dig into that, that is like it has particularly impacted women. And if we think about what's happened over COVID in terms of the loss of jobs or income or hours or those who have had to seek assistance through JobKeeper or JobSeeker or the various Centrelink payments, there has been a significant number of there's a bias towards women who've worked in a lot of those industries who've been most hard hit. So we do see that in our customer base and that the impact is being impacted more. Now it puts us in a difficult position as you would imagine. On one hand, we have to make sure that we're not discriminating and that we're fair and reasonable and we make sure that there is to your point ethical and fair access to credit. But on the other hand, we are a bank and we have a responsibility to make sure that we lend prudently and abide by not just the law around responsible lending, but just doing the right thing and making sure people are not getting in and over their head. So while we don't have any particular policies around women versus men in terms of borrowing, etcetera, what we've got to do is make sure that we're not inadvertently penalizing women. And so I can't point and to be fair, I can't point to any particular policy we have on that. I think it's something that Kevin and I should go and have a look at to make sure that we're not inadvertently causing more difficulty for women who may be looking to borrow in terms of a home or a small business. I'm not aware that there's any evidence that that is the case, but it's a really good question that you ask. In terms of what was the second part of your question? Just remind me. Just the I guess the disruptors. Yes, yes, yes. There's possibly more that the advisers that we're doing. We've seen and we've seen banks changing their products, adjusting their products to respond to that. And so how do you think about ensuring that you've got the right products to provide your customers what schools they need, I guess, to achieve your well-being goal? Yes, it's a great question. And again, I'm going to sound so these are general comments. And so you'll just have to forgive me for that. But I would say in general, when I look at a lot of the disruption around banking, as far as I can tell, very little of it is it has a business model of improving financial well-being for customers. A lot of it is actually precisely the opposite. And so we see, for example, in the small business lending space, non bank financial lending at 20%, 30%, 40% per annum kind of rate. So that is where there's a lot of sort of disruption, if you will. I understand it might be easier to access some of that, but it's not necessarily I don't think it necessarily meets the requirements around or the definition of responsible or improving financial well-being. So I think we have to be cautious of that. I think some of the I think the big banks and again, I can't speak for the industry, but for ourselves, actually the benefit of our products and services, while there will be all sorts of criticisms about them, they're pretty transparent and people know what they're getting. I think what worries me is that a lot of the so called innovation we're seeing in the marketplace from companies is largely products that are not transparent. They appear they seem so, so these ideas of interest free or somehow products that are packaged in a certain way that attract customers, but actually had business models that profit from default rates or other things. So I'm not sure and I worry personally that in a time of stress and that's where we're in where people are stressed and thinking about the future that people are susceptible to some of these sort of so called innovations. So I think we've got a job to do to make sure our products are suitable. What we've been doing and you mentioned credit cards and hey we all know that we have a range of credit cards and not all of them are suitable for people. We've got to do a much better job around suitability and we're really getting ready for the new DDO obligations and we're set up for there. We've done really good work on, for example, talking to people who have, say, persistent debt on a card to call them and say, this is not the right product for you. You would be better off on a lower rate personal loan or move to a low rate card. So I'm actually encouraged by the work we can do about using data and behavior analysis to better target make sure our customers are in the right product for them. And we've actually had some really great results of that and I don't have them off the top of my head, but we've spoken to many, many thousands of cardholders, for example, and getting them to move or many, many people who may be in the wrong, just simple transaction banking product that actually there was a low cost, low fee product available that they may not have known about or the circumstances have changed and now we're able to see through the data. Actually Europe, you should be on this lower rate product or low fee And we've been doing, I think, really good work in that regard. Shane, can I just add to what you said? I think in the pack, we mentioned one of the things we're just about to launch, which is your money report, which is I think gives people a really good understanding of where they're spending the money so that they're not spending more than they actually earn. And we've shared that with a sample pilot customer group. It's been really well received by them. Similarly, if you talk about innovative products, I think one of the things we launched in New Zealand last year was a healthy home loan package and an interest free insulation loan for customers, which has been well received. And I think the other thing that I'd call out is we're conscious that a lot of farmers in Australia are looking to Pacific Island Nations for labor. And we run a money minded program, which actually provides those Pacific Islanders with education around how to actually manage their money too as well. So I think there's a range of of, I'd call them innovative products that we think actually genuinely add value to customers that we're trialing and we're actually running at the moment. Thanks very much. Just one more question. Thanks Kevin for that presentation on the risk culture. And it looks like some really good progress they made. What's the best way for investors to get visibility on the progress and improvements in the risk culture. Is there disclosure any disclosure points we should be looking at in your annual reporting for instance? I guess what are your thoughts on that? Yes. Look, part of the reason for sharing the information with you today was exactly that point. I mean, over 80% of our staff say they feel really positive about the risk culture within the organization. So we thought it was appropriate to share that with you given it was the first time we'd undertaken a bank wide culture survey. We have been doing a series of culture reviews within different business units over the last number of years. So this has been an exercise we've been on for a period of time. And we'll certainly take on board your suggestion and feedback around what we may look to add in terms of disclosures when we come out with our full year results. Great. Thanks very much. Thank you. Your next question comes from Alastair Hunter from Franklin Templeton. Please go ahead. Good morning. Thank you for your time. A couple of questions, if I may. Just firstly on greenwashing in the sustainable finance sector. So it's interested in whom within the management structure ultimately has the responsibility for managing that risk? Obviously, we're seeing heightened litigation occurring in this sort of space. And secondly, probably one for Kevin, just in terms of how you're currently assessing risk weightings of your counterparties as to what are you currently incorporating in your analysis for your sort of assessment of individual risk around climate change. Okay. Thanks, Alistair. And you see it with the current consultancy. Oh, sorry. Thanks, Alistair, and nice to hear from you. On the first one, it's a good question actually. I'm we don't specifically have a person or a person, hey, you're the greenwashing person, you oversee these things. But and it's a good point. However, what we do do, under our Ethics and Responsible Business Committee that I chair, which is our sort of executive team where we executive committee from all parts of the bank, which we meet regularly on a range of issues, that's where we set our standards, culture and sort of philosophy around these sorts of issues. We've held ourselves to a really, really high standard on this. And so sort of not every single transaction, but certainly our sort of principles around these things are set in that committee and we do oversee some of the larger things. The sustainability team which works under institutional and is part of Mark Whelan's team, again we have a high degree of visibility there. And me personally, I know Kevin and Mark Whelan are deeply involved in transactions, etcetera. And I know that over the last year, for example, a number of the big decisions made around participation in certain transactions where we felt they didn't meet our standards and we decide to walk away, those things would get escalated, for example, even up to my level, even if it was for a notification where the team would tell me, hey, we've made a call on this. We're not going to participate in this because we don't think it meets the standards. But it's a good point and maybe we should consider even strengthening it further in a more formal way. We are very, very worried about this trend because ultimately it will it undermines the entire sustainability opportunity for everybody. And so we see our role in setting and holding standards extremely high. That is in our selfish best interest and it is in the best interest of the broader community and the business community. And so that's sort of an approach we take on that. Do you want to talk about the second? Yes. Look, actually just to add to what you said on the first one, I think, Alistair, there's been a lot of talk recently, particularly around carbon offsets as they relate to greenwashing. I'm not sure if that was part of what you're referring to. But I think a couple of points I'd make there. 1, our operations have actually been carbon neutral since 2010. And whilst our focus has been on sort of trying to reduce our environmental footprint as much as we possibly can, sometimes there are unavoidable emissions, if I can describe them to you that way. And what we do is we offset those in accordance with a certification from the Australian Government Climate Active Program. And we use an independent third party, in our case it's KPMG, to then verify that our offsets abide by the Australian government and international best practice standards. So we also only select eligible offset programs in the countries in which we operate. So I think a really good example of that is that in Arnhem Land, we supported a fire abatement project that was undertaken by the local indigenous communities. And what happens there is to support the sort of the frequency and the severity of bushfires, you've got rangers who go out and they conduct what you'd call controlled burns. Those controlled burns prevent bigger uncontrolled fires from happening later on in the season. And we think that, that demonstrates a significant reduction, not just in carbon emissions, but also you've got cultural, you've got environmental and you've also got economic benefits for the traditional custodians as well. But in relation to your second question with regard to risk weights and how we factor in environmental sustainability governance matters into that. We have agreed with APRA what the risk weights will be effectively for our customers. That's driven by the risk rating of those individual customers. One of the factors that feeds into our risk grade for a customer is actually management's capability, their focus, other factors such as risks that they might face from climate change, environmental, whatever the case might actually be. So it ultimately feeds through into our risk rate assessment for the customer, which in turn then flows through into the risk rates that are applied. Thank you. Your next question comes from Brian Johnson from Jefferies. Please go ahead. Thank you very much and congratulations on an outstanding presentation. I would flag that I think the danger is here, you guys disclosing more than your peers probably leaves you open to some kind of criticism. And I'd also observe that one of the most disappointing aspects of this is because we haven't got uniform regulation, he who acts the tightest perhaps even loses market share. So, so many questions, but the first one I just wanted to ask, just on Slide 48, which I know is at the back of the pack. But when we have a look at Slide 48, we can see some reference to the very upsetting developments that happened in Cambodia many years ago. But we also see that you've got quite a big investment in Ambank and Panin Bank. You actually bank in Myanmar. And then I'm just wondering, are you trying to flag a risk at the bottom of the slide? Is there something coming? So first of all And then I've got another one. Yes. So first of all, good to hear from you, Brian. And thanks for those comments. And I take your point about the risk we have, but we think that's a risk worth taking. So thanks for those comments. I mean, the short answer to that is no, we're not flagging anything. What we're saying here is, yes, we made a mistake and we made a mistake with non Penn Sugar and we don't want to make that mistake again. And so we've used it as a learning opportunity. We're pleased to have reached a conclusion to that matter and we've made and what we're doing here is really just tightening up our policies and approach to make sure we reduce the risk of that happening again. But it's not in relation. There's no there's nothing out there emerging we're trying to hit off or anything rather than just part of a normal learning opportunity to say, let's get in front of this, let's put ourselves in a place where these things can never happen again. So that's what that's about. I don't know if there's much else to The only other thing, Shane, that I'd add is that that's kind of really an upgrade to an existing policy. What it also does is it introduces a new grievance mechanism. And one of the things we're really keen to do in upgrading the statement was to work closely with a range of different international human rights NGLs. That's the only other thing I'd add to it. And I'm happy to just comment on Myanmar. But does your fundamental bid mix create a risk in this regard though? Because like the non pan sugar one was incredibly disappointing. Does it create a risk in this regard? Our fundamental business model and the fact that we operate outside Australia and New Zealand, yes. But I Well, the countries where you operate, Si? Yes, no, no, of course it does. But in our we can't live in a bunker. So we are a trade and regional bank and that served us well, but we need to tighten up and we need to learn how to operate in these places well. And I think it is perfectly reasonable to expect that we can and we will and we do. Just I might just make a comment in terms of Myanmar. You mentioned Myanmar. I just want to and again, for those I know Brian knows ANZ extraordinarily well, but for those who may be less familiar, I mean, our operation in Myanmar is incredibly small. We own it we don't bank any government bodies. We don't bank any state owned enterprises. We bank basically multinationals, a very small number actually, who operate there. Given the current situation, mean that has essentially been downsized to sort of a bare minimum service model at the moment. And so those sorts of things are they do present issues for us to manage and I'm confident we manage those things well and we use our sort of ethical decision making framework to consider how we our future operations in a place like that and who we will bank and who we won't. But I understand, Brian, it's complicated dealing in places around our region, but we have an obligation to do it well, and that's why we're strengthening our processes in this regard. Just the second question. Yes. Just on Slide 15, you've got an 80% positive score for the ANZ Risk Culture, which sounds really good until you think that that's saying you've got a 20% not a positive score, which I find alarming. Could you just explain that to us or make us feel perhaps even a little bit better or a little bit worse about that? So it's Slide 15. Yes. Look, Brian, really actually really good question, really good pickup. What the 80 it's just over 80%, 83%, but that is actually a really positive sentiment. So in the other 17% are people who have a positive sentiment, people who are neutral and also some others. And what I would argue what I'd also point out is that we've also had a number of people who've joined the organization over the course of last year. So some of them might not necessarily have a strong view one way or another. So don't for a second interpret it as it's only 83% positive. It's 83% really positive. There's an amount that's positive and then there's a few others that are in the neutral territory. So good pickup. And then just a final one, if I just a final one. And I want a couple of guys on basically addressing a lot of issues here, but just one that strikes me. Your slides are riddled with stuff about housing affordability, housing inequality. But I'm just wondering, a bank that basically is disproportionately reliant on mortgage brokers in a world of low interest rates has been losing share. If the RBA or APRA was to get sensible and actually apply macro prudential breaks, do you think your share would go up or down? That's a good question. So first of all, let me just stand back and say, yes, it is riddled with those things because we are concerned about those issues and we're concerned about them from the sort of broader community perspective, but also as a bank in terms of just the right sort of prudential settings in our book. I don't draw a link between the as you did, between the fact that we are slightly more reliant on brokers than others and it is slightly more than our peer group because at the end of the day, we still assess those thoroughly, right? I don't see that and as you know and we've discussed this over many years, the historical analysis would say that the broker originated home loans actually don't perform any worse from a risk perspective than those from a proprietary channel. So I don't think that in and of itself is a cause for concern. But macro prudential is an interesting one and we don't have we only really have 2 experiences to draw on in my view anyway, of relevance. 1 is the previous group of macro prudential controls that were put in place here in Australia some years ago to stop interest only and investment lending and etcetera. And I would say at the end of the day, they were good thing for banks, right? And they were a good thing in terms of actually probably in many ways helped us come into the COVID situation in a stronger position. And then more recently, we've got the experiences we're seeing in New Zealand with quite tough macro prudential interventions. What we've seen in New Zealand is it hasn't really impacted our share and I don't think it really impacted there were some anomalies in the way the last group was impacted here in Australia because they were those macro prudential were anchored in your starting point. We don't want to get into all the details. So it sort of had a mathematical impact. I reckon if they were if and I don't know what they would be, but hypothetically, if something was put in place tomorrow, I don't know that it would have a material impact in terms of share, to be perfectly honest, but it would depend on the specific detail. The only other thing, Shane, that I'd add is Thank you very much. Sorry, Brian. The only other thing I'd add is 3 years ago, APRA did an exercise around all of the banks. It then wrote to each of us earlier this year to reaffirm whether our underwriting standards had actually been altered in any way since that last exercise. And we were able to confirm that there have been no material changes in our underwriting standards over that period. Thank you. Thanks, Brian. Thank you. Your next question comes from Brendan Sprowls from Citigroup. Please go ahead. Good morning. I just want to follow-up on that question about housing and particularly macro prudential policy. I mean macro prudential policy is a little bit of a blunt tool. And as you mentioned earlier in this presentation, high house prices is not a solely Australian issue. You're seeing it in New Zealand, but you're also seeing it in other parts of the world. My question is, as a sort of a major bank, is there a moral responsibility to lend beyond just meeting lending standards? High house prices growing faster than income does have some unintended consequences with, obviously, homeownership moving a lot later in life. You also get the issue that you had a few years ago with investors taking a greater share of market than probably what is comfortable. Should this really be coming not from the regulators because of the blunt nature of the tools that they have in front of them, but actually coming from the banks like you've done in carbon emissions, which is obviously gone ahead of what, say, the federal government policy is in many parts here? I think we should. Although it's kind of ironic, Brendan, that you beat us up for losing market share at this particular time on a recent report, but we'll put that one aside. So I wonder about analysts. I didn't know I just asked like it'd be interesting to know what analysts' moral responsibility is in this area as well in terms of spruiking market share is the only measure of success. But anyway, we can have that discussion another time. Look, I think it's a very fair question. I think we do have a responsibility. I don't think it's acceptable to just sort of say, well, that's where the market is and we have to continue to grow and sort of participate because everybody else is doing it. I don't think that's acceptable. I do think we have a moral responsibility. I think we have a moral responsibility to engage with political decision makers, regulators to share data, our insights around affordability, around indebtedness, around policy ideas that may help ameliorate some of these impacts. You're quite right and you and Brian pointed out that macro prudential by definition is blunt. And while it's well intended, it can have unintended consequences. So we should be part of that debate. And we should also set our risk settings appropriately as a bank. And so I think it's really important that at this point we've taken an active position that we're not going to loosen our credit standards at this time. And I'm not suggesting that the other majors are, I just want to be clear, I don't know, that's for them. But we've made a view that this is actually not the time to be loosening risk standards, it's actually the time to be doing the reverse and actually be tightening. And it is a time to be asking more questions. It is a time to be doing more analysis on borrower capacity. It is a time to be really understanding a borrower's expense profile and their income outlooks. And so guess what, that takes a little bit more time to get done and may make some banks a bit uncompetitive in terms of things like turnaround times, but it's still the right thing to do. And I think over the long term, it's actually in shareholders' interest to do so. I mean, Brendan, the interesting thing is that as a bank, as a prudent institution, we have an obligation to manage our risks. That's actually what we're doing when we look at our approach to climate change. So it's about managing what we think is material risk for the organization. And similarly, as it relates to housing, we also feel we have an obligation to manage our risks too as well to protect all our various stakeholders. So it's a similar approach actually that we are taking to both. And just a follow-up question, if I can, on that. I do take your point, Shane, about potential analyst responsibility here as I have been writing about your market share. But just we have seen CBA move the serviceability rate a little bit higher. Do you think that's something we're going to see across the market? Or do you think it's just the way the market operates, it's more likely that we'll have to wait for some sort of regulatory intervention if that was to come? It's a really good question and I don't want to speculate. I don't know. I think though I imagine again, I imagine that all banks are sitting there thinking about their risk settings at a time like this with the level of house prices and the general uncertainty about the future economic outlook in terms of people's incomes. I mean there's lots to be positive about for the economy, but there's still some risk out there. I imagine people are thinking about things. And so you know that we have as well as anybody, we have a huge range of levers in there, whether it's the serviceability numbers, whether it's the way we think about expenses, whether that's the haircuts we apply to certain income, whether it's what level of UMI, the uncommitted monthly income we're willing to accept or not. So there's a whole range of things in there. I would imagine and again, I'm putting myself out there a little bit, Brennan, but I would imagine most banks are considering how to be a little bit more conservative at this point rather than not because of the underlyings that we are seeing. So I wouldn't be surprised if there will continue to be tweaks to policy settings of the various banks, just sort of make sure people are more comfortable. And what some of those are going to be visible, by the way, and a lot of them will be, I imagine, sort of invisible behind the scenes. But that would certainly seem to be prudent from my perspective as the way forward. Chen, just to add, if you don't mind, to what you said. Our current serviceability flow, and if you compare us against others, we're kind of 5.1 percent, 5.2 percent very similar. It is as you alluded to, it is one factor that we take into account in the decision process. But what I would say is given where interest rates are at the moment, we think that today provides a significant buffer to our customers and to us as well for that matter by setting it at that level. But it is something that is reviewed just to put your mind at ease Brendan. We look at that on a constant basis. So every month we look at all the various factors that feed into our underwriting standards and that is one of them. Thank you, guys. I appreciate your candid answers. Thank you. Your next question comes from Matthew Wilson from E&P. Sorry to labor the point, but obviously housing is the elephant in the room. And if we look to the UK and Ireland as an example, it took us a bit of housing bust there to introduce sensible DTI type constraints such that no more than 15% of home lending can have a DTI above 4.5 times. If we look at APRA's latest numbers, Australia is running at 22% above 6 times and 65% above 4 times. We do have a problem and income multiple constraints are quite an elegant solution, removing the debate over expenses and what happens to interest rates ultimately. I can remember when that was 17% today, they're 10 basis points. APRA looks core. Housing has become financialized and it's become politicized. So I sort of echo Brendan's point. This is an opportunity for the sector to act and take control of home lending. And I don't mind you losing a bit of market share. I've still got a positive rating on the stock showing. So I think this is a great opportunity for the sector. I well, thanks, Matt, and thanks for those, I think, thoughtful comments. I don't disagree with you. I think though and you know because you all of you, all of the analysts on the call know because you guys have been following the market longer than many people have been working in it. It's not as simple as that, right? And there is the ongoing pressure to be in the game and the ongoing pressure around market share. And again, I'm not blaming anybody for that. It's just the reality. I think that's why it does take courage. And I think the industry and ANZ can do a better job on that. But I don't disagree with you. All I can tell you is that internally, the conversations we have with our board, with our various risk committees, the way we set our policy settings are exactly around those sorts of issues. What is I mean, we have okay, we don't have to rely but we have to rely on a regulator to tell us what's right. We have to have our own risk appetite and sit down and say, what do we think the right DTI sort of numbers are or how much we're willing to see in high LVR or not, etcetera, etcetera. And I agree with you. My well, I'll get myself in trouble here again, I think. But my view is that there's too much within our industry of outsourcing the problem to regulators. And just when they set the level, our job is to go as far as close to that line as possible. Now I don't think that's right. And I think that we have to do a better job of working what's right for us. And then I imagine your follow-up question, we then need to do a better job of being more clear and disclosing how we think about those risk points. But Kevin, you probably have a view on to share it as well. Matt, to your point and to Shane what Shane's alluded to, regulators do provide guidance. Ultimately, we have to manage the risks. So I alluded it in the presentation to our risk appetite statements. I mentioned the increase in the non financial risk side of things. We also have very clear financial risk metrics that sit within those risk appetite statements. The sort of measures that you've referred to are the types of metrics that we have in our risk appetite, and we do manage to them. And there's regular reporting of that, not just to us as a management team, but also to the board as well. So whilst it might not be imposed on us by a regulator, it is actually in a sense part of how we manage the business on a day to day basis. I might add one thing though and it's sort of in summary and from Brian, Brendan and Matt your questions, just and again, the other thing we've done here and again, it's come at some cost and I'm not looking for a gold star on this, but it's just to recognize we have made it clear for some time we have a preference of people, owner occupiers who borrow and pay down principal, right? Because we think that is the right thing to do, we think it is the right thing to do for the borrower, it is the right thing to do in terms of financial well-being position. That comes at a significant cost to our business. Why? Because as you guys know, but our mortgage book amortizes much faster because people are paying down principal. If you were trying to maximize just the financial outcomes, you're much better off in pushing interest only loans. But we've made a, I think, ethical purpose driven decision to say there's a place for interest only, I accept that. And there's absolutely a place for investors, but our focus is on people who pay principal and that's why we have a disproportionately high exposure to that. And as I said, right as of the moment, that is coming at financial cost to us in terms of the balance on it in our book. It's not the only thing. We've sort of self confessed to having some operational issues, but that is a big driver of it. And it also comes at a cost in terms of things like our customers disproportionately use offset balances and so that's again that comes at a cost in terms of revenue for us. But actually you can't criticize a customer for doing what's right and actually we'd all sit around and advise our friends, our children, our parents that that is the right thing to do, pay down principal, use your offset balance as much as you can, etcetera. So I think in the long term, it's the right strategy, but it does come at a cost at certain times. Thanks for that. Look, I appreciate it's a complex issue and housing is the elephant in the room in this country. We don't want to be like the U. K. And be reading Philip Lowe's book in the same vein as you read Mervyn King's book. Fair enough. Yes. Thank you. Thank you. Thank you. There are no further questions at this time. I'll now hand back to Mr. Elliott for closing remarks. Hey, look, I just want to thank everybody for really engaging conversation. I hope you found the presentation useful. We've tried to cover issues that we thought would be of interest to various stakeholders. And given the quality of the questions there, I think we succeeded in getting some really good ideas on the table. And I do appreciate all the questions. I think they were extremely thoughtful. And they've given us something to think about. And there were a few ideas in there that I know we'll go away and consider in terms of not just disclosure and what we talk about with you, but actually how we run the So and that's really where these things are valuable. It is fine. I just want to say it's actually good to talk to all of you. It's a shame we can't do so in person. I for 1 have always appreciated the time we have with the analyst and investor community. I always learn something from them and I look forward to being able to have more informal conversations with the broader community over the coming years. So thanks very much for your participation today.

• Slides