Contemporary Issues in Accounting: Ethical Concerns of Investing in Fossil Fuels

This report highlights why big four banks like Westpac Banks are investing on fossil fuels, though it can be considered as an ethical issue. It discusses the disadvantages of using fossil fuels, the ethical issues related to it, and major findings. Recommendations are also provided.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
Student Name

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Table of Contents
Introduction......................................................................................................................................2
Disadvantages of using fossil fuels..................................................................................................2
Westpac and its ethical issue of fossil fuel project..........................................................................2
Major Findings.................................................................................................................................4
Recommendations............................................................................................................................6
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

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Introduction
In modern times, it can be seen that people are continuing to extract and burn fossil fuels more
than ever before. This plays a key role in global warming and climate change, though there are
lot of usefulness in using fossil fuels. This report highlights why big four banks like Westpac
Banks are investing on fossil fuels, though it can be considered as an ethical issue. Investing in
fossil fuels can affect the environment by increasing the carbon footprint and this can also play a
negative role in public health.
Disadvantages of using fossil fuels
There are several disadvantages of using fossil fuels. They contribute largely to global warming
which can led to destruction of the world. They are not at all considered as renewal sources of
energy and they are considered to be unsustainable (Warren, Christoff and Green 2016). Beside
this, they are incentivized and accidents can happen due to their usage. Beside this, fossil fuels
are extremely harmful for public health. Due to this reason, it can be considered as unethical to
use fossil fuels as it is harmful for the environment as well as for public health (Bowman 2010).
Westpac and its ethical issue of fossil fuel project
In the recent years, it has been seen that many banks are investing on dirty fossil fuel and
Westpac is not an exception. The ratio between investment of fossil fuel and renewal energy of
Westpac Bank is on the higher side. This can be further evaluated with the help of the following
figure:-
Figure 1: Investment done by Australian Banks in fossil fuel and renewal energy

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(Source: Financial Review 2018)
Westpac used to have a clean and green image due to its previous environmental policies.
However, later on the management of the organization have changed their policies which
hampered their image in a negative manner. They were at a real risk in losing their status in the
market as an environmental friendly bank. This also suggested the lack of leadership within the
organization (Arup 2018). This started in the year 2016. It has been also observed that all the big
four banks of Australia invested around $9.1 billion on fossil fuels in 2016. This cannot be
considered as a very good sign for any of the organizations (Westpac.com.au. 2018).
Figure 2: Investment done by various banks in 2015
(Source: Zhou 2018)
The above graph reflects that various banks like Westpac was into investment of fossil fuels.
However, later on in 2017, the organization Westpac had stopped funding to Adani coal mine
which helped to build up the image of the firm (Financial Review. 2018). The management of

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the organization Westpac wanted to increase the exposure to climate solutions up to $10 billion
in 2020 (Westpac.com.au. 2018).
Major Findings
In the world of global warming and tremendous pollution, it is the duty of mankind to
have the mind and heart to make sure that the world is not more affected by pollution and
everyone can lead a life of hail and happiness. However, due to the tremendous greed of a
section of people, there are still cruel practices and evil affairs that's not only hampered the life
of the human beings but also affect the environment and ecological balance in a negative
perspective. The burning of fossil fuels is one of the popular ways in which the ecological
balance of the environment is disturbed and makes way for the future dis-balance both for the
life of human beings and mother earth. The following essay deals with the subject of fossil fuels
and also highlights the ethical issues related to fossil fuels. Due to this reason, it was permissible
for an organization like Westpac to invest in dirty fossil fuels (Bowman 2014).
Fossil fuels are defined as the type of fuel which is formed by the means of
decomposition and the degradation of living organisms which were present on the earth around
six hundred and Fifty million years ago. There are a number of fuel types such as coal, natural
gas, petroleum and other type of fossil fuel which are of non-renewable nature. This type of
fossil fuels if exhausted would not be regenerated under any circumstances and so it becomes a
duty of the human beings make sure that these energy sources are not used about the capability
and also to make sure these are not exploited by false people and are used by the people for the
betterment of the society and for the country (Richardson 2017). There are certain ethical issues
related to the fossil fuels which are to be set and determined to make sure that the people who are
utilizing these sources what is ethical manners and for the betterment of the society and the
common people. The ethical issues related to it are as follows:-
One of the principal ethical related to the fossil fuel can be determined as the climate
change that is associated with the excessive use of fossil fuel. Climate change is defined as the
change that is occurred in the climate of a particular place all of the whole Nation and even the
whole world. Due to the indiscriminate and excessive use of fossil fuels for years, great climatic
change not only in the areas in which it is being done but also in the adjacent part and even the
whole country. The climate change has included global warming, rise in sea water level and also
changing food habits. Due to the excessive use of fossil fuels, the climate of that particular place
changed drastically making temperatures on extreme level. Rainfall has decreased considerably
in those areas making the people and their living disastrous (Van der Ploeg 2016).
The climate change has also caused Global warming pictures also influence the crop pattern and
thereby the food habits of the people. Due to excessive mining and use of fossil fuels and use of
fossil fuels, constable increase in carbon emission which has also caused depletion in the Ozone
layer of the atmosphere. This depletion of Ozone layer has led to Ozone holes which allow the
entry of ultraviolet rays into the Earth surface causing skin cancer to a majority of the people. In
addition, the increase in mining of fossil fuels and the burning escort’s serious deforestation
areas in which they are being done (Boersma 2015). This is one of the primary ethical issues of
fossil fuels which fosters the sense of ecological wellbeing in the minds of the people. In
addition to this, if big banks invests on fossil fuel project, then their environmental image will be

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hampered very badly. Like in case of Westpac, the organization faced a stiff challenge from all
its stakeholders due to its previous environmental policy and investing in different fossil fuel
projects. Therefore, it can be inferred that there needs to be downfall shift in exposure of the
banks in the near future (Bowman 2014).
It has also been observed that things have started improving from the previous year. The overall
lending to fossil fuels by Big four Australian banks have decreased to 7.4 billion (Zhou 2018).
Westpac have introduced a positive environmental policy and have stopped funding to Adani
coal mine. They considered to be unethical in case of funding to fossil fuels. They have changed
their policies towards fossil fuels due to various reasons. The organization came under immense
pressure from various social and environmental activist groups due to its previous policies
towards fossil fuel. Westpac have also set a target to reduce carbon emission footprint by 9
percent by 2020. This can be considered as a positive step on behalf of the firm
(Westpac.com.au. 2018).
Recommendations
There are several recommendations that can be given to organizations like Westpac regarding
their ethical issue of funding dirty fossil fuel project. The organization have taken several steps
in order to stop funding in such fossil fuel projects. However, there are still various scope of
improvement. Organizations like Westpac needs to halt all new loans related to coal and other oil
and gas projects. In addition to this, the organization needs to withdraw all their investments and
loans to fossil fuel extraction companies within the next few years. If the big four banks
withdraw all their investments then such projects can never happen again. This will further play a
positive impact upon the environment and also help to reduce carbon footprint. In addition to
this, it can be also inferred that management of all big four banks need to take some positive
steps in order to prevent such kind of dirty fossil fuel project.
Conclusion
From the above analysis, it can be concluded that Westpac have taken a positive step while
withdrawing all their investments from dirty fossil fuel project. When the organization was
investing in this project, the management of the firm faced firm protests from all their
stakeholders and it also tampered the brand image of the firm. Therefore, it can be inferred that
all the other Australian Banks need to withdraw all their investments and loans from coal and
other oil and gas projects and take positive steps towards environment.

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References
Arup, T. (2018). How dirty is your bank? Big four lending big to fossil fuels. [online] The
Sydney Morning Herald. Available at: https://www.smh.com.au/environment/how-dirty-is-your-
bank-big-four-lending-big-to-fossil-fuels-20150615-ghoko3.html [Accessed 18 Sep. 2018].
Boersma, M., 2015. How Does Sustainable Banking Add Up?.
Bowman, M., 2010. The role of the banking industry in facilitating climate change mitigation
and the transition to a low-carbon global economy.
Bowman, M., 2014. The Limitations of Business Case Logic for Societal Benefit & Implications
for Corporate Law: A Case Study of ‘Climate Friendly’Banks.
Financial Review. (2018). Westpac faces fossil fuel test under new climate pledge. [online]
Available at: https://www.afr.com/business/banking-and-finance/9afrwestpac--20151209-gljig9
[Accessed 18 Sep. 2018].
Richardson, B.J., 2017. Divesting from climate change: the road to influence. Law & Policy,
39(4), pp.325-348.
Van der Ploeg, F., 2016. Fossil fuel producers under threat. Oxford Review of Economic Policy,
32(2), pp.206-222.
Warren, B., Christoff, P. and Green, D., 2016. Australia’s sustainable energy transition: the
disjointed politics of decarbonisation. Environmental Innovation and Societal Transitions, 21,
pp.1-12.
Westpac.com.au. (2018). Westpac launches updated Climate Change Action Plan | Westpac.
[online] Available at:
https://www.westpac.com.au/about-westpac/media/media-releases/2017/28-april/ [Accessed 18
Sep. 2018].
Zhou, N. (2018). Big Australian banks invest $7bn more in fossil fuels than renewables, says
report. [online] the Guardian. Available at:
https://www.theguardian.com/australia-news/2017/mar/06/big-australian-banks-invest-7bn-
more-in-fossil-fuels-than-renewables-says-report [Accessed 18 Sep. 2018].