Address to the Australian Sustainable Finance Institute - Industry cocktail event
Acknowledgement - Ngunnawal and Ngambri peoples who are the traditional custodians of the Canberra area
I want to start by congratulating Australian Sustainable Finance Institute not only for this terrific event but for the work that they – and all of you – have been doing.
It is worth taking stock of just how much has been achieved.
It’s not that long since the phrase “sustainable finance” would have been met with derision by many in the business community, and suspicion by many in the environment movement.
The diversity and depth of attendance here tonight are just one sign of how far we have progressed since then.
Today the idea that investors will play an important role in driving sustainable outcomes has become not only an accepted; but an expected part of climate policy.
As the Treasurer has pointed out in the past, an underappreciated development from the Glasgow climate conference was the steps taken by our independent financial regulators towards providing more guidance on climate-related risks to our financial system and our economy.
Sustainable finance is now one of the priorities of our Council of Financial Regulators’ climate working group.
Regulatory requirements will drive some actions. But many are coming from investors themselves.
The power of investors to shift behaviour has been on display over the last few years.
It is a power we need to harness.
The investment decisions of the past have been partly responsible for much if the historic carbon emissions. Future investment decisions must help define and drive the path to net-zero.
We are seeing more and more efforts towards this here in Australia and around the world.
The Net Zero Asset Managers initiative, set up in the close of 2020, brings together BlackRock, Vanguard, State Street and dozens of other fund managers. Its 87 signatories represent more than $37 trillion under management (more than 40 per cent of all assets under management worldwide).
It’s a big move, albeit just one of many and reflects the increasing demand from investors for sustainable and ethical investments.
That demand is not going away.
Last month Cerulli, an American research company, reported on its survey of asset managers across the States and Europe. It found that the top reason reported by more than half of asset managers for developing net-zero strategies was pressure from institutional investors, with industry competition a close second.
This would not be news to anyone here.
Investors are sending companies a clear message – if you don’t change, the market leave you behind.
I know that so many of the companies and institutions are already on that journey.
The support that the BCA and AI Group have shown for Australia’s 43 per cent by 2030 target has been crucial in helping end the climate wars and create a shared imperative to reach net zero.
This support also reflects the work being done at enterprise level by their members – any by Australian companies in general.
There has been a Commonwealth Government sized hole in Australia’s climate change policy for the past decade. Although the government may have been standing still, Australian businesses were not. Enterprises have been developing net zero plans and thinking about their path to carbonisation. An ecosystem of investors and...
The commonwealth government’s inaction hasn’t been benign though.
Almost three quarters of CEOs surveyed by Accenture in 2021 in the lead up to the Glasgow COP said they were in effect flying blind because of government and policymaking flip-flops.
Last week I chaired the clean energy discussion in the jobs and skills summit, where Kane Thornton from the Clean Energy Council said:
“Nothing undermined confidence of investors more than unpredictable, unhelpful and unstable climate and energy policy”
It wasn’t just new clean firms. Traditional energy businesses have expressed the same frustrations. As the AI Group said back in July:
"Climate change policy needs to get more predictable, disciplined and transparent to underpin the business investment needed to meet our challenging climate goals, and the Federal Government's legislation tabled in Parliament … is a positive start,"
It’s one of the reasons our commitment to 43 per cent emissions reduction by 2030 is so important.
I’m responsible for the passage of our Climate Change Bill through the senate at the moment; I’m looking forward to us being able to enshrine that commitment in legislation. It is a signal to Australia and to the world.
But I know investors need certainty in other respects, and I acknowledge the good work that ASFI and others are doing to provide clarity to those enterprises who are trying to do the same thing.
From ESG requirements through to the TCFD framework, sustainable investment benefits from clear and intelligible regulatory frameworks.
As the Treasurer has said, the government is keen to work with Australian businesses and investors in favour of the emerging “robust international approach to climate risk reporting”.
The government has committed to establishing “usable, credible and comparable” disclosure rules that enable investors to make informed decisions.
Minister Plibersek spoke last week about the opportunity to make Australia the “Green Wall Street” for biodiversity credits.
There is so much opportunity here – and so much capacity to harness the power of finance to drive good, green outcomes for Australia.
I look forward to working with you to see it done.