Australia's entire financial sector, including the big four banks, major insurers, fund managers and superannuation funds, are calling for an institutionally embedded collective target of net zero greenhouse gas emissions by 2050.
The target, which if achieved would end Australia's contribution to global warming by the middle of the century, is one of the central goals of the Australian Sustainable Finance Initiative's completed road map, released on Monday.
ASFI was launched in early 2019 with the goal of designing a comprehensive blueprint to reshape the financial system to deal with climate change and other sustainability issues. On Monday it published that road map, describing it as a "plan for aligning Australia’s financial system with a sustainable, resilient and prosperous future for all Australians".
The road map includes 37 recommendations that seek to embed sustainability concerns in corporate, government and regulatory governance structures, build sustainable finance markets and support community resilience through more socially responsible lending practices.
The global economy is on the edge of the next industrial revolution to a more sustainable low carbon future.Many of the recommendations deal explicitly with climate change, proposing a standardised use of the Taskforce on Climate-related Financial Disclosures for all ASX-listed businesses and any financial institution with turnover of more than $100 million, regular climate change scenario analysis and stress testing, portfolio holdings disclosure, and common, science-based emissions targets.
— Geoff Summerhayes, APRA
But while the road map calls for the creation of "a sustainable capital market", it stops short of recommending concrete market-based measures favoured in other countries, such as an emissions trading scheme or a carbon tax, reflecting the continued political stalemate on the subject of carbon pricing.
At The Australia Financial Review Energy and Climate Summit on Monday, Energy Minister Angus Taylor reiterated the federal government's opposition to carbon pricing
The road map also recommends that ASFI be made a permanent official body similar to the Council of Financial Regulators.
"ASFI would be governed by a board composed of representatives of financial institutions, with an advisory council composed of government, regulators, industry bodies and civil society representatives contributing perspectives and providing advice to the Board on workplan priorities," the road map states.
Beyond climate changeThe road map goes beyond just climate change to areas such as biodiversity, community finance and indigenous affairs in an effort to build what ASFI co-chair Simon O'Connor called a "new normal". Alongside the Paris Agreement goals, it aims to help Australia meet its sustainable development goals and the Sendai Framework for Disaster Risk Reduction and Convention on Biological Diversity.
“Recent events, such as bushfires, floods and drought, as well as COVID-19, have highlighted how locally and globally connected our economy, society and environment are," Mr O’Connor said.
“The financial services sector recognises the critical role it needs to play for Australia to recover from the pandemic and to prepare for our future challenges. We need to mobilise now to enable a prosperous and thriving economy, which can only be delivered while investing in a sustainable and resilient society, and healthy environment."
Its 18-person steering committee includes representatives from Australia's most powerful financial institutions, including the Commonwealth Bank of Australia, Westpac, NAB, ANZ, insurers QBE and IAG, asset manager Pendal and industry super fund Cbus.
NAB's executive general manager of corporate finance Connie Sokaris, who is on the ASFI steering committee, said a key aim for NAB in participating in the initiative was to help customers transition their business models in line with a low carbon and sustainable model.
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| "I’ve been really pleased with the level of industry and private sector involvement, " says Connie Sokaris of NAB and a member of the ASFI steering committee. |
"The transition will take time and planning," she said. "Some are really well progressed, others are just starting."
Ms Sokaris declined to comment on whether federal government needed to play a more active role in the initiative.
“I’ve been really pleased with the level of industry and private sector involvement. ASFI is about the industry and our customers taking the lead on this. I cannot comment on government policy, but we are seeing industry playing a leading role."
While no federal government representative sits on the steering committee, the Australian Prudential Regulation Authority's Geoff Summerhayes participates as an observer, as do two representatives of the Australian Securities and Investments Commission. The steering committee also includes former Liberal leader John Hewson.
“The global economy is on the edge of the next industrial revolution to a more sustainable low carbon future," Mr Summerhayes said. "ASFI recognises the immense risk and opportunity that this transition presents for the Australian financial system and the global economy.
“A number of the recommendations are directed at APRA and our regulatory
peers. While there is a degree of alignment between the recommendations
and APRA’s strategy, we are committed to carefully considering the ASFI
report."
Links
- Recovery must be green, say big banks
- Big four banks form climate investment initiative
- Task Force on Climate-related Financial Disclosures
- Australia must act on energy reform or be left behind: AEMO
- Council of Financial Regulators
- Aware Super nearly halves emissions in mass divestment
- Top CEOs form exclusive climate change club
- Australia is a net zero embarrassment
- We can become a net exporter of clean energy, say experts
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