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| Sunrise or sunset?: Green investments face an uncertain future in Australia. Photo: Bloomberg |
Investors are stepping up funding for so-called "climate-aligned" or green bonds, with the tally rising 16 per cent compared with 2015 to $US694 billion ($924 billion), according to the fifth annual report, Bonds and Climate Change: The State of the Market in 2016 compiled by HSBC.
The tally, which counts bonds explicitly labelled green or those whose main target is to reduce greenhouse gas emissions or build resilience to climate impacts, must multiply if economies are to finance their decarbonisation in time to avoid dangerous warming.
"Some $US2.5-3 trillion of capital is needed each year in climate change-related investments, with 60-70 per cent of that going to emerging markets," the report said, adding an "adequate" level of such bond issuance should be in the order of $US1 trillion a year by 2020.
The report noted Australian issuance of unlabelled climate-aligned bonds is still small – in the order of $2.5 billion – and dominated by rail operator Aurizon.
"With finalisation of the historic Paris Agreement in late 2015, more investors are realising the need to align their portfolios to the goal of limiting global warming to well below 2 degrees," said Emma Herd, chief executive of the Investor Group on Climate Change.
Three of the big four banks will join the Australian launch of the bonds report in Sydney on Monday, with Treasury Corporation Victoria and Flexigroup joining the discussion on climate finance.
However, analysis by climate finance campaign group Market Forces has found lending by the big four to renewable energy projects has dropped so far this year – and fallen short of their declared intensions.
In the first half of 2016, ANZ and Commonwealth Bank made no new loans to the sector, while NAB lent $88 million and Westpac $73 million. The half-year total of about $162 million compared with $516 million a year earlier, Market Forces said, citing public details of the deals.
The CBA lagged the other three, lending $904 million to the renewables sector since 2008 out of a total of $6.014 billion by the big four.
"While renewable energy is a boom industry globally, here in Australia the sector has been starved of the support and certainty it has needed for far too long," Julian Vincent, Market Forces' executive director, said.
"But at the same time, if the banks are seriously behind the goal of cleaning up our energy sector, they can't credibly hide behind policy."
John Connor, chair of The Climate Institute, called on the Turnbull government if it retains office to bring forward its planned 2017 review of climate policies to bolster investor confidence in the sector.
Mr Connor noted the UK government, even amid the chaos of the Brexit vote on Britain leaving the European Union, last week agreed to adopt a goal of cutting 1990-level carbon emissions 57 per cent by 2030.
Much work needs to be done.
A paper published in Nature last week, including by some Australian-based researchers, found that national emissions targets as pledged in Paris would fall far short of the sub-2 degree warming goal. Instead, they imply a median warming of 2.6-3.1 degrees by 2100 compared with pre-industrial levels.
Links
- Investors in world's top coal shipper Glencore pass climate-change motion
- Climate change slams global economy, study from Stanford and Berkeley shows
- Climate change response must include slower population growth
- Apple, Google, Microsoft among companies with biggest climate change credentials
- 'We need a miracle': Bill Gates Q&A on climate change
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- Climate change a 'huge' financial risk, warns Bank of England
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