Owners of National Australia Bank Ltd (ASX: NAB) shares may be able to get excited as the big four ASX bank share focuses on a huge opportunity that could be worth trillions of dollars.
Currently, NAB and the other big four banks — Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group Ltd (ASX: ANZ), and Westpac Banking Corp (ASX: WBC) — are heavily focused on areas like mortgage lending and banking for businesses.
But, there could be a huge change coming.
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Planning for a greener world
NAB has commissioned a new report, All Systems Go, that highlights huge monetary investment is needed to position Australia's economy for growth in a low emissions world.
As an introduction to the report, NAB chair Philip Chronican wrote:
Australia's decarbonisation journey is underway, with many businesses cutting their greenhouse gas emissions and governments moving to legislate targets to achieve net-zero by 2050…the scale of action needed is far broader than the Industrial Revolution and the timeline is roughly half.
With Australians facing more frequent and intense natural disasters, slow or no action will impact homes, businesses and communities. Our economy will become globally uncompetitive and our environment increasingly unsafe.
Transforming Australia to a low carbon economy is inevitable and complex. If we get it right, the opportunities are immense. NAB is backing businesses to realise that opportunity.
$4 trillion estimate
NAB's report, produced by Deloitte, said that of the total expected investment in a net-zero Australia, around $4 trillion is estimated to reflect the capital flows and investments across four identified economic systems.
These systems are being reset to form a series of "complex, interconnected and emissions-free systems". These are the energy, mobility, raw materials manufacturing, and food and land use systems.
Those systems act as the "foundation of Australia's emerging economic opportunities in a net-zero world", the report says.
Deloitte Access Economics said that of the estimated $420 billion in new capital investment needed to achieve Australia's emissions target, around $400 billion will be required across those four core economic systems and enabling areas "that must become low emissions".
Of that number, the report estimates that a transformed energy system will require around $100 billion of additional capital that must flow into low-emissions assets for the Australian economy to be on the path to net-zero.
NAB's opportunity
The report stated that:
The structural adjustment and value creation that will occur in response to climate change will be the business of this decade. As businesses, government and regulatory bodies increasingly commit to net-zero targets and announce climate initiatives, the direction and scale of change is inevitable. This inevitability brings a clear focus on the need for, and the scale of, the task of this transformation. This 'Great Reallocation' of capital will dominate the commercial, regulatory and policy landscape in Australia, and globally, over the coming decade.
NAB can tap into this in various ways. The bank itself is "having conversations" with its top 100 emitters to make sure they've got a plan to get themselves to a "much better position". Over 75% of its energy assets are in renewables, while the other 25% is "the reallocation that needs to happen".
Time will tell how effective NAB is at helping Australia with this and capitalising on the opportunity.
NAB share price snapshot
Over the last month, NAB shares have risen by 11.7%.
