Outside Melbourne’s Sofitel on Tuesday, a group of Greenpeace activists held up placards protesting the financing by ANZ Banking Group of fossil fuel assets such as coal-fired power stations, coal mines and ports.

“No new coal” and “ANZ polluting your world”, read the signs — a play on the ANZ logo of “we live in your world.” Inside, the environmental group sought to question ANZ CEO Mike Smith, addressing a trans-Tasman business luncheon, about the bank’s intentions. Would it finance, for instance, a new coal fired power station?

These are the first actions of what promises to be a long campaign, and one with potential

ly deep implications for many corporates.

Much has been said about certain industries losing their social licence to operate at some point in the future. Greenpeace wants to hit the fast forward button and has decided to target ANZ, not just because it is the biggest Australian financier of fossil fuel projects, but also because it prides itself for being a signatory to the UN Equator Principles, is the highest rating bank on the Dow Jones Sustainability Index, and has pledged to go carbon neutral. In short, it has set itself up as being keen and green.

John Hepburn, a Greenpeace climate campaigner, says his organisation it sees a contradiction between ANZ’s green rhetoric and its lending practices.

“We’d like them to make a commitment not to finance new coal fired power stations,” Hepburn says, adding that there is both carbon risk and reputational risk in financing such ventures. He notes that private conversations with bankers suggest it’s a position that most banks are close to arriving at anyway. “We just want them to formalise that.”

ANZ probably thinks that some things are better left unsaid, at least at this point. But what bugs Greenpeace is that there are at least 12 coal fired power stations in the planning stages in Australia, and the new emissions rules promised by the Gillard government during the election campaign won’t affect any of them. They want to make sure that none are built.

Given this, and the absence of a climate policy from the federal government, financial institutions like ANZ were probably an inevitable target. After all, it worked with the Gunn’s pulp mill. But is it fair to expect banks to act as a traffic cop for financing?

“Views differ on how far banks should go as society’s police in moving ahead of governments,” writes Citi analyst Elaine Prior in a report released last week. She notes that some NGOs think that the Equator Rules — a voluntary standard in which banks pledge to finance only projects that operate on a sound social and environmental standard — do not go far enough. “There remains plenty of room for debate,” she notes.

Simon Longstaff , the principal of the St James Ethics Centre, says that any institution that seeks to play up its green credentials can expect to come under scrutiny, and must be prepared to defend their position.

Longstaff says the nature of the climate change challenge is such that it is a collective responsibility, which means that while there is no particular responsibility on banks to act alone, no organisation is justified in ignoring it.

He points to the experience of the animal rights campaigns championed by Henry Spira and Peter Singer, who on occasions would not insist that an activity be stopped immediately, but some of the profits at least be channeled towards R&D to find an alternative solution.

Greenpeace’s Hepburn says the organisation does not expect ANZ to simply abandon its current fossil-fuel loan-book, although its campaign does seem ambiguous on that point.

ANZ’s line is that it sees itself as being part of an “evolution” rather than a “revolution”. An emailed statement said: “We recognise the importance of coal in Australia’s energy security while transitioning to a lower carbon future.”

The statement said ANZ assesses every new energy project against its energy and risk policies, and commits to “actively working with our customers to help them transition to a lower carbon future over time” and “to continually monitor the social and environmental performance of their existing energy projects.”

This is a similar approach to many so-called ethical funds which, rather than screening out unwanted customers, proclaim to agitate within.

“We are starting to see a shift in our portfolio from coal to alternative sources with renewable projects already representing one third of our project finance energy portfolio,” the ANZ statement said.

Prior’s analysis says that even though loans to fossil fuel-related businesses are becoming emotive, and carry some tangible risk due to potential carbon pricing, they are not, at this point, a material risk to bank share valuations.

“Our assessment puts an upper boundary on exposure at roughly 0.2 per cent to 1.3 per cent of sharemarket capitalisation for the four banks, even under a ‘worst case’ scenario,” the report said.

“In reality, we do not expect sudden collapse of value across a bank’s generation portfolio, but expect transition from coal generation to other fuels will occur over time.”

Prior does say, however, that the reputational risk is tangible, even if it is not significant. But it will be the reputational risk that plays on the minds of the executives and the board of ANZ as they deal with this campaign. And Greenpeace knows it.

*This article originally appeared on Climate Spectator