David Gall and Melbourne

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The bank has built its corporate and institutional business around key areas such as serving funds and supporting clients with ESG strategies, explains the group executive. Marie Kemplay reports.

David Gall, group executive of National Australia Bank’s (NAB’s) corporate and institutional bank (CIB), likes to look at the big picture. “We have built the business around big macroeconomic themes,” he says. One such big theme is a growing and ageing population, with pension needs to match. Australia’s pension funds, or superannuation funds as they are known locally, have become some of the biggest and most sophisticated in the world.

NAB, Mr Gall says, has built up a healthy profile, serving such funds, providing them with banking services alongside financing and advisory services to support their acquisitions. Such funds are typically looking for investment opportunities with a steady income stream, such as infrastructure and infrastructure-style assets. “We’ve built a business, internationally, in the UK, in the US and in parts of the EU, serving some of the world’s most active funds in terms of deploying their capital for investment,” says Mr Gall.

A key part of NAB’s business model, he says, is developing deep relationships with its clients. “We have a very focused strategy, and we’re quite selective about the clients that we work with.” He stresses this is not just marketing, but rather something it has really been living out. “If anything, we deal with fewer clients today than we did three or four years ago, but our business is more profitable because we are serving those clients more deeply,” he says. There are around 35 funds globally with which NAB has such deep relationships, according to Mr Gall.

Investment convergence

This approach has developed over a number of years. In the past, NAB had a significant business, particularly in the US, serving funds and their financing needs. Infrastructure was considered a separate area. “We have since seen a real convergence where we could see these funds channelling their investment towards real assets,” says Mr Gall. “So, we have arranged ourself as a CIB business around that, focused on those client needs end-to-end.” This is an area where the bank has seen “material growth”, which Mr Gall puts down to it having “a clear proposition, which we deliver well”.

if anything, we deal with fewer clients today than we did three or four years ago, but our business is more profitable

For example, the bank has developed expertise in arranging US private placements, bringing together investors with organisations in sectors such as property and utilities, looking for long-term capital. “We’ve done a lot of that for the Aussie market, but we’ve taken clients from various parts of the world to the US private placement market,” says Mr Gall. He believes the flourishing of this market has been a positive development for both issuers and investors, enabling issuers to access longer-term funding than might otherwise be possible via straight bank lending or other capital markets options and matching investors, such as pension funds, with steady income-generating assets.

NAB has also recently opened an office in Paris, which will be the headquarters for its EU subsidiary business. The choice of location was partly motivated by Brexit, but Mr Gall is keen to highlight how this business will strengthen the bank’s ability to serve clients with their investment activities within the EU, an important area of focus for many of them. The bank has been able to recruit experienced local talent to support it in that.

NAB’s increasing presence in European markets has had interesting collateral benefits. The bank is a significant funder of global renewables projects. “We engaged in our first renewables project in 2003 and since then have been involved in the financing of more than 160,” says Mr Gall. He adds that, as a result of financing renewables infrastructure in markets such as Europe, “we’ve been able to take some of the innovations that we’ve brought into this market back into the Australian and New Zealand markets”.

That strong focus on renewables over the past two decades has also provided a solid foundation for the bank to engage more broadly with its clients on decarbonisation strategies. The bank has become a leading player in the development of sustainable finance markets in Australia, as well as making an important contribution globally.

Supporting transition

“I see our role as financing the investment and the innovation that needs to occur to achieve transition,” says Mr Gall. “And to have consistent conversations with our clients around what action we think they need to take and what their stakeholders, such as investors, expect from them.” In particular, he highlights a programme of work the bank has been engaged in with 100 of its clients with the highest levels of greenhouse gas emission – across multiple sectors, including power generation, mining, heavy manufacturing, transport and commercial real estate – to support them in developing their plans for transitioning to low-carbon business models and operations.

Career history – David Gall 

  • 2018 Group executive, corporate and institutional banking, NAB
  • 2014 Group chief risk officer, NAB
  • 2013 Executive general manager, banking and wealth solutions, NAB
  • 2011 Executive general manager working capital services, NAB

The bank has already engaged in depth with more than half of those 100 clients, and Mr Gall expects to work with the rest during the next six to 12 months. “I would say that around 80% of those clients that we have engaged with so far have made, or are very close to making, firm commitments about how and when they will achieve net zero in their business,” he says. He adds that where NAB can add value in these conversations is providing ideas about how they can accelerate their transition, and supporting those plans with the right financing.

However, Mr Gall acknowledges that there are variations in how advanced those plans are between clients and sectors. For example, in areas such as power generation and commercial real estate, plans are generally relatively sophisticated and advanced. But in other sectors where the technologies to support transition are not as mature, there is clearly more work to do, though he believes that “12 months from now it will be a different story”. 

“Across all of these areas it is crucial if we are genuinely to be a bank for the transition that we are engaging with clients at the early stages,” he adds.

An important part of that dialogue is signposting what the bank will be comfortable financing in the future. NAB, like other banks, is under pressure to reduce the environmental impact of its business, and a major part of that is addressing the carbon emissions of its clients. Mr Gall believes it is vital to be as transparent with clients as possible. “We are deliberately having these conversations with clients now so there is a long lead time for change, and also so that they can see that we’re taking these issues seriously ourselves as an institution – we’re not just asking what they’re doing, we’re making changes too.”

The bank is already phasing out lending to the thermal coal industry by 2030, and has capped the level of lending it will do to the oil and gas sector. The cap is currently at $2.4bn, and from 2026 this will decrease in line with supporting International Energy Agency’s Net Zero Emissions 2050 scenario. This is important, Mr Gall says, because it will allow NAB to continue to work with clients as they reduce their emissions, which the bank believes is the right thing to do. Further details about the bank’s long-term approach to financing so-called ‘hard to abate’ sectors will be available in November. NAB is due to publish decarbonisation pathways for four industries: power generation, oil and gas, thermal coal and cement.

Innovating solutions

In the short term, Mr Gall believes carbon offsets and trading will play an important role for those hard to abate sectors in their decarbonisation efforts, “although in the long term there won’t be that same need”. NAB has partnered with CIBC, Itaú Unibanco, NatWest and several other global banks to form a trading and settlement platform for carbon credits, which is expected to be fully live by the end of 2022 (pilot transactions have already taken place). “We believe it is important to build a market where there can be trust and traceability,” says Mr Gall, adding that the platform will play a significant role in scaling voluntary carbon markets.

At a product-specific level, NAB has also been in the vanguard of innovation in markets such as environmental, social and governance (ESG) derivatives. In October 2021, it structured its first ESG-linked derivative in the Australian market, having already arranged six other deals for European clients, and in April 2022 it closed its first ESG-linked foreign exchange derivative for London-based renewable energy infrastructure investor Trig. It has also been a leading underwriter for sustainability-linked loans and bonds in both Australian and New Zealand markets, and further afield. “We spend a lot of time working with clients that want to do something sustainability-linked, to ensure that those goals are sufficiently stretching and also multifaceted,” says Mr Gall, adding that the bank has on occasion refrained from involvement in deals where it felt targets were not stretching enough.

Upholding standards

Ensuring standards are upheld begins with the capabilities of staff, Mr Gall argues. In addition to having deep subject matter experts on sustainability matters, the bank has also developed a programme with Melbourne Business School which has been delivered to around 100 of its corporate and institutional bankers and more than 50 of its agricultural bankers “who have relationships with high-emitting clients”. The educational programme aims to build the confidence of these bankers on sustainability issues. “It’s not about giving them great depth of knowledge, but about enabling them to begin that conversation with clients, knowing the right questions to ask clients and acting as a bridge to our deep subject matter experts,” says Mr Gall.

This is part of a wider agenda of learning and skills development at NAB, which has enrolled more than 10,000 of its staff on a professionalisation programme run in partnership with the Financial Services Institute of Australasia. “Continued learning is really important in being able to continue to deliver the best for clients and also to provide our bankers with the skills for the jobs of the future,” says Mr Gall.

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