ANZ’s strong governance framework provides a solid structure for effective and responsible decision making within the organisation.

ANZ’s strong governance framework provides a solid structure for effective and responsible decision making within the organisation. The Board has oversight of the risks and opportunities arising from our activities and is responsible for setting the direction, strategies and financial objectives for the bank and for monitoring the implementation by management of those strategies and objectives.

There are five principal Board Committees — the Audit Committee, the Environment, Sustainability and Governance (ESG) Committee, the Risk Committee, the Human Resources Committee and the Digital Business and Technology Committee. Each Committee has its own Charter setting out its roles and responsibilities.

At management level, the Group Executive Committee (ExCo) comprises ANZ’s most senior executives. There is a delegations of authority framework that clearly outlines those matters delegated to the CEO and other members of senior management. In addition, there are a number of formally established management committees that deal with particular sets of ongoing issues.

For further detail on ANZ’s governance framework see our 2017 Corporate Governance Statement available on anz.com/corporategovernance.

Board of directors

Photograph of ANZ Board of DirectorsDavid Gonski, AC – Chairman, Independent Non-Executive DirectorGraeme Liebelt – Independent Non-Executive DirectorJohn MacfarlanePaula DwyerIlana AtlasShayne Elliott – Chief Executive OfficerJane Halton – Independent Non-Executive DirectorLee Hsien Yang – Independent Non-Executive Director

From left to right: David Gonski, AC – Chairman, Independent Non-Executive Director, Graeme Liebelt – Independent Non-Executive Director, John Macfarlane – Independent Non-Executive Director, Paula Dwyer – Independent Non-Executive Director, Ilana Atlas – Independent Non-Executive Director, Shayne Elliott – Chief Executive Officer, Executive Director, Jane Halton – Independent Non-Executive Director, Lee Hsien Yang – Independent Non-Executive Director

Full biography details can be found on our website at anz.com/directors.

Directors' Meetings

The number of Board meetings and meetings of Committees during the year the Director was eligible to attend, and the number of meetings attended by each Director were:

Note: The following table can be swiped horizontally to view more

  Board Risk Committee Audit Committee Human Resources Committee Environment, Sustainability and Governance Committee Digital Business and Technology Committee Special Committee Committee of the Board1 Shares Committee1
  A B A B A B A B A B A B A B A B A B
Ilana Atlas 12 11     5 5 4 4 4 4                
Paula Dwyer 12 12 6 6 5 5 4 4             2 2    
Shayne Elliott 12 12                         3 3 1 1
David Gonski, AC 12 12 6 6 5 5 4 4 4 4 3 3     5 5 1 1
Jane Halton, AO, PSM 11 11         3 3 3 3                
Lee Hsien Yang 12 12 6 6     4 4     3 3     1 1    
Graeme Liebelt 12 12 6 6 4 4 1 1 4 4 3 3     2 2    
Ian Macfarlane2 4 4 2 2 1 1     1 1                
John Macfarlane 12 12 6 6 5 5         3 3            

Columns marked A indicate the number of meetings the Director was eligible to attend.

Columns marked B indicate the number of meetings attended. The Chairman is an ex-officio member of the Audit, Environment, Sustainability and Governance, Human Resources, Risk and Digital Business and Technology Committees.

Any Director is entitled to attend any Committee meetings. Directors sometimes attend meetings of Committees of which they are not a member.

Executive Committee

Photograph of ANZ Executive CommitteeShayne Elliott – Chief Executive OfficerMaile Carnegie – Group Executive Digital BankingGraham Hodges – Deputy Chief Executive OfficerAlexis George – Group Executive WealthMichelle Jablko – Chief Financial OfficerMark Whelan – Group Executive InstitutionalGerard Florian – Group Executive TechnologyKathryn van der Merwe – Group Executive Talent and CultureDavid Hisco – CEO New Zealand and Group Executive Asia Wealth, Pacific and International RetailFred Ohlsson – Group Executive AustraliaNigel Williams – Chief Risk OfficerFarhan Faruqui – Group Executive International

From left to right: Shayne Elliott – Chief Executive Officer, Maile Carnegie – Group Executive Digital Banking, Graham Hodges – Deputy Chief Executive Officer, Farhan Faruqui – Group Executive International, Alexis George – Group Executive Wealth, Nigel Williams – Chief Risk Officer, Michelle Jablko – Chief Financial Officer, Fred Ohlsson – Group Executive Australia, Mark Whelan – Group Executive Institutional, Kathryn van der Merwe – Group Executive Talent and Culture, Gerard Florian – Group Executive Technology, David Hisco – CEO New Zealand and Group Executive Asia Wealth, Pacific and International Retail.

Full biography details can be found on our website at anz.com/exco.

Our approach to Environmental, Social and Governance (ESG) Risk Management

The ESG Committee (formerly, the Governance Committee), led by ANZ’s Chairman, has a specific focus on sustainability, approving the bank’s sustainability targets and reviewing progress in achieving them. It also advises management on ESG issues and reviews minutes from management committees regarding sustainability issues.

The Board is responsible for establishing and overseeing the bank’s risk management framework, with the Board Risk Committee responsible for developing and monitoring compliance with ANZ’s risk management policies. Management reports concerning the implications of new and emerging risks are reviewed by the Risk Committee. This may include risks that arise from the social and environmental impacts of our lending decisions.

“The Responsible Business Committee is charged with making sure that we embed our purpose in everything we do — that we are thoughtful in the way we engage across the bank and with the community, so that people will notice and say ‘ANZ is really making a difference’.”
— Shayne Elliott, CEO

This year we established the Responsible Business Committee (RBC), chaired by the CEO and comprised of senior executives from business divisions and Group functions, including Risk, Corporate Affairs and Human Resources. The Committee replaces the Reputational Risk, and Corporate Sustainability and Diversity Committees, and is a leadership and decision making body that exists to advance ANZ’s purpose. Among other responsibilities, the RBC agrees and sets ANZ’s risk appetite for industry sectors to align with the bank’s purpose and values. It also oversees and monitors current and emerging ESG risks and opportunities, debating and agreeing relevant material matters including breach of Sensitive Sector Policies and exemptions requested by the business.

One of the key ways we identify and manage the risks associated with our business lending is through the application of our Sensitive Sector Policies — consolidated this year into a new Social and Environmental Risk Policy. This new policy consolidates the principles and standards previously embedded within our six Sensitive Sector Policies into one ‘umbrella’ policy.

This holistic policy incorporates social and environmental considerations into lending decisions for all customer sectors. Relationship managers are required to respond to a broad range of social and environmental questions before the bank enters into a relationship with any customer. Our credit policy requires customer relationships to be reviewed regularly, which includes considering any social and environmental issues.

The Social and Environmental Risk Policy incorporates relevant content of ANZ’s revised human rights standards including ANZ’s ‘zero tolerance’ for improper land acquisition and involuntary resettlement.

Respecting human rights

Failing to respect human rights and adequately manage human rights-related risks can have negative consequences for our business, eroding trust and damaging relationships with key stakeholders.

Last year we upgraded our human rights standards, Respecting People and Communities: ANZ’s approach to Human Rights, consulting with customers, NGOs, Government, industry bodies, academics and subject matter experts within ANZ.

We established a three-year program of work to guide implementation of our revised standards and have met our implementation priorities for 2017 by:

  • updating the social and environmental screening tool used by our bankers to include our ‘zero tolerance for land grabs’ commitment;
  • piloting a strengthened customer due diligence process in a selected country in Asia; and
  • reviewing and updating employee training programs to reflect our revised standards.

Our standards are embedded in our everyday business activities, including through our human resources policies and in customer and supplier screening tools.

Material issues and risk management

One of the ways in which we identify our material social and environmental risks is through our annual materiality assessment. Our most material issues are captured and managed within our existing Material Risk categories (as the table below shows). There is also a clear link between our Material Risks and the challenges arising from the external environment in which we operate.

A full list of ANZ’s Material Risks is available in the Annual Report.

Note: The following table can be swiped horizontally to view more

Material Risk Type Description Management of Material Risks Most Material Issues
Compliance Risk The probability and impact of an event that results in a breach of any of the following that apply to the Group’s businesses: laws, regulations, industry standards, codes, internal policies, internal procedures, or principles of good governance.

Key features of our Compliance Risk framework include centralised management of key obligations, and emphasis on identifying changes in regulations and the business environment, so as to enable us to:

  • proactively assess emerging compliance risks; and
  • implement robust reporting and certification processes.

Fraud and Data Security

Credit Risk

The risk of financial loss resulting from:

  • a counterparty failing to fulfil its obligations; or
  • a decrease in credit quality of a counterparty resulting in a financial loss.

Credit Risk incorporates the risks associated with us lending to customers who could be impacted by climate change or by changes to laws, regulations, or other policies adopted by governments or regulatory authorities, including carbon pricing and climate change adaptation or mitigation policies.

Our Credit Risk framework is top down, being defined by credit principles and policies. Credit policies, requirements and procedures cover all aspects of the credit life cycle — for example: transaction structuring, risk grading, initial approval, ongoing management and problem debt management, as well as specialist policy topics.

Responsible Business Lending

Operational Risk

The risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. Operational Risk:

  • includes technology risk, cyber risk, legal risk and conduct risk, and damage arising from inadequate or failed internal processes, people and systems; but
  • excludes Strategic Risk.
The Group operates a three-lines-of-defence model to manage Operational Risk, with each line of defence having defined roles, responsibilities and escalation paths to support effective two-way communication and effective management of our operational risk. Also, we have ongoing review mechanisms to ensure our Operational Risk framework continues to meet organisational needs and regulatory requirements.

Fairness and Ethical Conduct

Fraud and Data Security

Digital Innovation

Reputation Risk

The risk of loss that directly or indirectly impacts earnings, capital adequacy or value, that is caused by:

  • adverse perceptions of the Group held by any of customers, the community, shareholders, investors, regulators, or rating agencies;
  • conduct risk associated with the Group’s employees or contractors (or both); or
  • the social or environmental (or both) impacts of our lending decisions.

We manage Reputation Risk by maintaining a positive and dynamic culture that:

  • ensures we act with integrity; and
  • enables us to build strong and trusted relationships with customers and clients, with colleagues, and with the broader society.

We have well established decision-making frameworks and policies to ensure our business decisions are guided by sound social and environmental standards that take into account Reputation Risk.

Fairness and Ethical Conduct

Responsible Business Lending

Customer Experience

“COMPANIES MUST IMPROVE REPORTING ON THEIR MANAGEMENT OF CARBON RISKS AND OPPORTUNITIES FOR THEIR SHAREHOLDERS AND BANKS TO MAKE MORE INFORMED DECISIONS. WE ARE DOING OUR PART BY BEING AN EARLY ADOPTER OF THE FSB TASKFORCE RECOMMENDATIONS AND THUS SIGNALLING WE WILL BE SEEKING GREATER DISCLOSURE FROM OUR CUSTOMERS ABOUT THEIR CLIMATE-RELATED RISKS AND OPPORTUNITIES.”
— Shayne Elliott, CEO

Improving our climate-related financial disclosures

We are improving disclosure of our carbon strategy, management, metrics and targets. Our reporting reflects the Financial Stability Board’s (FSB) Task Force on Climate-Related Disclosures (TCFD) recommendations.

Using the FSB TCFD’s disclosure framework, we have begun discussions with some of our customers in emissions-intensive industries. Their public disclosures under the framework will enable us to better understand how they are managing their climate-related risks and opportunities.

1. Governance

Within ANZ, our Board has the highest level of oversight and responsibility for climate change. The ESG Committee is responsible for reviewing and approving our climate change-related objectives, including goals and targets. The Board Risk Committee has formal responsibility for the overview of ANZ’s management of new and emerging risks, including climate change-related risks.

The RBC provides strategic leadership on ANZ’s corporate sustainability risks and opportunities, monitoring progress against our targets, including those related to climate change. Minutes of the RBC are reviewed by the Board ESG Committee.

The RBC is also responsible for understanding and assessing the impacts of specific industries as they relate to current and emerging risks, including climate change. Where appropriate, these issues are also referred to the ESG Committee for discussion.

2. Strategy

Identification and management of our material sustainability risks and opportunities, including those presented by climate change, supports ANZ’s business strategy and aligns with the approach outlined in our Climate Change Statement. We achieve this through: setting targets; establishing low carbon financial products and services; policies to guide our decision making; staff training; and managing direct operational impacts.

Our strategy needs to be resilient under a range of climate-related scenarios. This year we have undertaken climate-related scenario testing of a select group of customers in the thermal coal supply chain. This included customers with operations in thermal coal extraction, coal rail transport, coal-associated ports and coal-fired power generation.

We assessed these customers using two of the International Energy Agency’s scenarios; the ‘New Policies Scenario’ and the ‘450 Scenario’. This provided us with a better understanding of the preparedness and resilience of these customers to climate change. We will engage with them over the next 12 months to gain further insights into their risk and opportunity assessments.

3. Risk Management

Our Climate Change Statement sets out the actions we are taking to support the transition to a low carbon economy. Our most material climate change risks and opportunities result from our lending to business and retail customers. We want to support businesses that are resilient and have the capacity to successfully manage the transition to a low carbon future. Information on how we engage with our customers is discussed in our 2017 ANZ Corporate Sustainability Review.

There are some climate change risks and opportunities that have the potential to generate substantive change in our business operations, revenue or expenditure. These include:

Energy policy/regulation: the introduction of energy policy and regulations, supporting lower emissions and improved reliability, provide a more stable environment for investment, and subsequently revenue opportunities, with existing customers and in new markets.

Changes in precipitation extremes and droughts: ANZ has a large presence throughout rural and regional Australia and New Zealand. Many of these regions have been impacted in recent years by severe climatic events such as drought and high temperatures, adversely affecting our customers’ production levels. Reduced revenue for these customers may impact their ability to repay credit extended to them.

Changing consumer behaviours: businesses’ response to climate change, including the adoption of new technologies, presents a number of opportunities, including the provision of funding and advisory services to customers involved in renewable energy generation, construction and retrofit of green buildings and less emissions intensive manufacturing and transport. We are well placed to maximise these opportunities and have funded and facilitated $6.9 billion in low carbon and sustainable solutions since 2015. This includes projects using renewable or more efficient materials, renewable or more efficient energy generation or technologies that reduce greenhouse gas emissions and waste.

4. Metrics and targets

We use a range of metrics to assess the impact of climate-related risks on our business activities. In recent years, we have increased transparency regarding our business lending exposure to key industry sectors in Australia and New Zealand, enabling stakeholders to better understand our customers’ contribution to the national emissions profiles of our home markets. We also track the average emissions intensity of the electricity generation assets we provide project finance for, together with the breakdown of funding provided to coal, gas and renewable assets.

We have established Group-wide emissions reduction targets that cover the emissions arising from the energy we use across our building portfolio of commercial offices, branches and data centres. In 2017 we have reduced the emissions from premises energy use by 20% compared to 2013, exceeding our target of a 1-3% reduction by 30 June this year.

Further detail on these disclosures, including the scenario testing, are discussed in our 2017 ANZ Corporate Sustainability Review, available on anz.com/cs in December.

“ANZ delivered a solution that took us above and beyond the basic necessity of obtaining long-term, competitively priced financing and aligned with our track record of being an ESG leader in the Australian business community.” — Peter Menegazzo, Chief Investment Officer, Investa.

Case Study Photo - ANZ and InvestaAnna Galbraith – Associate Director, Capital Markets, ANZPeter Menegazzo – Chief Investment Officer, InvestaNina James – GM Corporate Sustainability, InvestaPaul White – Co-Head of Capital Markets, ANZKatharine Tapley – Head of Sustainable Finance, ANZ

Financing the Transition to a Low Carbon Economy

Case Study

We worked with Investa Office Fund (Investa) this year to issue a seven-year, AUD$150 million dollar green bond — the first corporate green bond ever issued in Australia — the proceeds of which were used to refinance a portfolio of low-carbon buildings.

By combining Investa's desire for financial innovation with ANZ's market knowledge and execution capability, we were able to deliver a successful green bond issuance. The bond was over-subscribed and attracted a strong proportion of 'dark green' investors and also gave the company a chance to further promote its ESG credentials to the market. Investa is one of Australia's largest owners and managers of Institutional-grade office real estate, controlling assets worth more than $11 billion.

From left to right: Anna Galbraith – Associate Director, Capital Markets, ANZ, Peter Menegazzo – Chief Investment Officer, Investa, Nina James – GM Corporate Sustainability, Investa, Paul White – Co-Head of Capital Markets, ANZ, Katharine Tapley – Head of Sustainable Finance, ANZ

 
  • 1. a. b. The meetings of the Committee of the Board and Shares Committee as referred to in the table above include those conducted by written resolution.
  • 2. Ian Macfarlane retired as a Director on 16 December 2016.
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