06/10/2019

(AU) Reserve Bank Warns Climate Change Posing Increasing Risk To Financial Stability

The Guardian - Katharine Murphy

The Reserve Bank says climate change can result in a decline in the income or value of collateral that banks are lending against. Photograph: Saeed Khan/AFP/Getty Images
Australia’s central bank has delivered a clear warning that climate change is exposing financial institutions and the financial system more broadly to risks that will rise over time if action isn’t taken.
The RBA’s financial stability review, released Friday, concluded that while climate change is not yet a significant threat to financial stability in Australia, it is becoming increasingly important for investors and institutions to actively manage carbon risk.
The bank notes Australian insurers are the most directly exposed to the physical impacts of climate change, and points out that inflation-adjusted insurance claims for natural disasters this decade are more than twice what they were in the previous 10 years. It notes “this impact is likely to grow over time”.
“An increase in the frequency and severity of natural disasters will increase the incidence of damage to, or destruction of, physical assets that are insured or used as collateral,” the RBA said.
“Assets that are exposed to increasing physical risk – such as property located in bushfire-prone or coastal areas – could decline in value, particularly if these risks become uninsurable.
“Climate change could also reduce certain types of business income that is used to service loans. Examples include changing rainfall patterns that result in lower or less predictable income from agriculture, more frequent storms disrupting supply chains and therefore sales, and damage to natural assets that reduces tourism income.”
The RBA says banks and other lending institutions are also exposed to physical risks because climate change can result in a decline in the income or value of collateral that they are lending against.
It says Australian financial institutions that have exposure to carbon-intensive industries – such as power generation and mining, or to energy-intensive firms – “will also be exposed to transition risk”.
“Transition risk will be greatest for banks that lend to firms in carbon-intensive industries and to individuals or businesses that are reliant on these firms,” the bank said.
“Other financial institutions investing in carbon-intensive industries, such as superannuation and investment funds, are also exposed to the risk that climate change will diminish the value of their investments. This could occur both through direct investments in carbon-intensive industries, or indirect investments in banks that lend to these industries”.
It warns financial institutions “also face reputational damage if they are seen to be contributing to climate change or failing to manage climate risks”.
The RBA concludes that climate change poses a clear systemic risk, but it is not yet an imminent threat to financial stability. But it warns this could change. “Climate change could emerge as a risk to financial stability if it is not properly managed, or if the size of climate-related losses increased materially.
“Rising climate-related losses could also erode confidence in an institution or the financial system, leading to a withdrawal of funding. This would be more likely if the physical impacts of climate change are more severe or occur sooner than currently projected, or if the transition to a low-carbon economy occurs in a disruptive and costly manner.”
The RBA notes that both the banking regulator Apra and the corporate watchdog Asic have become proactive in managing carbon risk, and the Council of Financial Regulators has established a working group on the financial implications of climate change to help coordinate agencies’ actions.
Friday’s analysis builds on a warning by the Reserve Bank deputy governor, Guy Debelle, who said in March climate change posed risks to Australia’s financial stability.
Debelle said policymakers needed to consider warming as a trend and not a cyclical event. He said policymakers and businesses needed to “think in terms of trend rather than cycles in the weather”.
“Droughts have generally been regarded, at least economically, as cyclical events that recur every so often. In contrast, climate change is a trend change. The impact of a trend is ongoing, whereas a cycle is temporary.”
The deputy governor said there was a need to reassess the frequency of climate change events, and “our assumptions about the severity and longevity of the climatic events”.
In March, Apra flagged an intention to increase scrutiny of how banks, insurers and superannuation trustees are managing the financial risks of climate change to their businesses.
Last year Asic said climate change was “a foreseeable risk facing many listed companies in the Australian market in a range of different industries” and warned directors and management of listed companies “to understand and continually reassess existing and emerging risks including climate risk that may affect the company’s business”.
In that same assessment by the corporate watchdog, 17% of listed companies in the Asic sample identified climate risk as a material risk in their operating and financial reviews.
The RBA noted on Friday, according to the Intergovernmental Panel on Climate Change (IPCC), it will take significant effort to limit global warming to 1.5C above pre-industrial levels, as targeted in the Paris agreement.
“Even if targets are met, this level of warming is likely to be accompanied by rising sea levels and an increase in the frequency and intensity of extreme weather including storms, heatwaves and droughts,” it said. “Some of these outcomes are already apparent. These changes will create both financial and macroeconomic risks”.

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Australia’s Biggest Property Companies Are Making Net-Zero Emissions Pledges – Now We Can Track Them

The Conversation - 

Huge crowds marched last week to demand progress towards net zero emissions – and companies are listening. AAP Image/James Ross
Corporate Australia is taking action on climate change. Most recently, at the UN Climate Summit, Atlassian cofounder Michael Cannon-Brookes announced the A$26 billion Australian software company’s commitment to net zero emissions by 2050.
Net zero pledges like this are becoming more common but currently there is no way to really track momentum towards net zero emissions across different sectors of the economy.
Now, a Net Zero Momentum Tracker initiative has been established by ClimateWorks Australia and the Monash Sustainable Development Institute to track emissions reduction commitments made by major Australian companies and organisations, as well as state and local governments.
The tracker aims to place all commitments to net zero emissions in Australia in one place and evaluate how well they align with the Paris climate goals.

Property sector tracking towards net zero emissions
We began by assessing Australia’s property sector. Last week we released a report examining all property companies listed in the ASX 200, plus all of those required to report their emissions under the National Greenhouse and Energy Reporting Act.
Among the companies we looked at are Dexus, Mirvac, Stockland Corporation, GPT Group, and Lendlease. They develop, own or manage some of Australia’s largest corporate offices, commercial properties, retail centres, retirement villages, and residential developments.
The report found almost half – 43% – of Australia’s largest listed property companies have made commitments that closely align with the Paris Climate Agreement, aiming to achieve net zero greenhouse emissions before 2050 for their owned and managed assets.
Significantly, the six companies with the most ambitious net zero targets represent 36% of the ASX 200 property sector. Among these six, several major companies – Dexus, Mirvac, GPT Group, and Vicinity – are aiming for net zero emissions by 2030, demonstrating the business case for strong climate action.

Sector leaders can inspire copycat action
By highlighting what action organisations are taking and how, the Net Zero Momentum Tracker initiative aims to encourage more organisations to make and strengthen commitments to reduce their emissions, in line with the goal of net zero emissions by 2050.
For example, Australia’s largest owner and manager of office property, Dexus, has a comprehensive strategy for reaching its goal of net zero emissions across the group’s managed property portfolio. This includes reducing energy use, shifting to renewable electricity, electrifying their buildings, and reducing their non-energy emissions from waste, waste water and air conditioning.
Of particular significance is Mirvac’s pledge to be “net positive” by 2030. This means the company aims to go beyond net zero, reducing emissions by more than its operations emit. Mirvac has established an energy company to install rooftop solar on their commercial buildings and is selling power to occupants, among other initiatives. The company also has a “house with no bills” pilot project, to explore how their upstream indirect emissions can be minimised for residential developments.
Another major company, the GPT Group, has extended its commitment beyond the assets it owns and manages to all buildings it has an ownership interest in, including buildings it co-owns or does not manage.
These companies will get multiple benefits from their action, including reduced operating costs, better health and productivity for occupants, and increased sales prices, rents and occupancy rates.

Need to accelerate action
While many property companies are tracking in the right direction, none of the companies we considered had net zero targets which comprehensively covered all of their emissions – such as those from co-owned assets, their supply chains and investments.
There is still significant opportunity for property companies to strengthen their commitments towards net zero emissions. This requires targets which address the full scope of direct and indirect emissions within each company’s influence, supported by detailed plans to achieve this.
By making these public commitments to reduce emissions, the property sector is helping build momentum towards achieving this goal across the entire Australian economy.
The next assessments to be undertaken by the Net Zero Momentum Tracker initiative include the banking sector and state and local governments.

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Climate Change Is Really About Prosperity, Peace, Public Health And Posterity – Not Saving The Environment

The Conversation -  | 

What will it take to get people to connect to the climate change story? mauro mora/Unsplash, CC BY
The story of climate change is one that people have struggled to tell convincingly for more than two decades. But it’s not for lack of trying.
The problem is emphatically not a lack of facts and figures. The world’s best scientific minds have produced blockbuster report after blockbuster report, setting out in ever more terrifying detail just how much of an impact we humans have had on the Earth since the dawn of the industrial revolution. Many people believe anthropogenic climate change – rapid and far-reaching shifts in the climate caused by human activity – is now the story that will define the 21st century, whether anyone’s good at telling it or not.
Nor is it merely a problem of delivery. The past decade has witnessed an explosion of climate change communication efforts spanning nearly every conceivable medium, channel and messenger. Documentaries, popular books and articles, interactive websites, immersive virtual reality, community events — all are being used in increasingly creative ways to communicate the story of climate change. Many of these efforts are beautifully designed and executed, visually and narratively engaging and careful to avoid common traps and shortcomings that have tripped up previous efforts.
As communications specialists who have each spent more than a decade observing and studying how people, media and organizations talk and think about climate change, we’ve come to understand that the climate change communication problem runs much deeper: It’s baked into the nature of the issue itself.
It’s hard for a single person to connect
with a global-scale problem. JPL/NASA, CC BY
Climate change is abstract, uncertain, unfamiliar, impersonal, diffuse and seemingly distant, even as the frequency of climate-related events continues to increase in many parts of the world. This is not to say that the well-documented and well-funded efforts to sow misinformation, doubt and denial aren’t also real challenges facing climate change communicators and advocates; of course they are.
But even without explicit efforts to confuse and divide the public, climate change would still be a uniquely challenging issue to talk about in ways that motivate public engagement rather than inspire despair and fatalism.
The sad irony, of course, is that the story of climate change is in fact a deeply human one – we caused it, we will suffer from it and we alone can take action to avoid its worst consequences and prepare for the rest.
But shifting climate change from a scientific reality to a social, economic and political reality has proven extremely difficult. This is still primarily an “environmental” issue in many people’s minds, and that is a real problem for building a broad-based social movement around climate change.
What other health and security benefits come with tackling climate change? sergio souza/Unsplash, CC BY

Solve additional problems by tackling the first
Over the past few years, one suggested solution around this communications roadblock has been to tell the story of what are called climate change co-benefits.
The idea is simple and compelling: If the public won’t or can’t get behind climate action for climate’s sake, maybe they will if all the many nonenvironmental benefits of reducing carbon emissions are brought to the foreground. Hence, climate change as a threat to public health, to national security, to social mobility.
Traditional co-benefits framing tells the story like this: If humanity does something about climate change – if we reduce carbon emissions through massive investments in renewable energy and retrofitting of inefficient buildings, if we improve resilience through investing in green infrastructure, nature-based solutions and all the rest – we will not only solve the climate change problem, we’ll also reduce economic inequality, improve public health, reduce threats to national sovereignty and geo-political stability, and generally make people’s lives better.
These and many other co-benefits of aggressive and proactive action on climate change are real, and they will very much improve the lives of billions of people living on this planet today and in the future. But is this the best way to talk about the issue in service of building a powerful social movement?
The problem with the standard co-benefits narrative isn’t that it distracts too much from the core climate change challenge (it doesn’t), nor that it is somehow manipulative (it’s not) or simply not necessary (it is).
We suggest the problem is that it still leaves too much of the focus on climate change as an environmental or scientific issue while relegating all the other things people often care more about – addressing rampant inequality, increasing access to affordable health care, improving people’s material and emotional lives – to the background.
Leading with “if you really cared about your pet issue, then climate change should be your priority” is neither welcoming and inclusive nor likely to succeed in building a broad base of support for aggressive action on climate. Condescension rarely wins converts.
A wind farm promotes human health – and just happens to benefit the climate?
Brandon Hoogenboom/Unsplash,CC BY
Rethink which benefit drives the story
But that doesn’t mean advocates should necessarily give up on co-benefits. Maybe they just need to flip the script on its head – to lead with and keep the focus on the nonclimate benefits of aggressive decarbonization and adaptation efforts. Maybe “addressing climate change” should be treated as the co-benefit rather than the leading motivation for action that could materially help billions of people, today and in the future.
Ultimately, the most effective long-term approach to getting diverse audiences to engage deeply with climate change may require that advocates stop treating it as a standalone problem that could benefit from being linked to other topics many people care more about. Instead, advocates may need to fundamentally rethink and alter the way they talk about and position climate change as an issue in the first place.
If climate change is now becoming a meta-narrative against which all other stories play out, perhaps no one needs to argue that decarbonization of the global economy will produce some health benefits or improve people’s well-being. Perhaps the best strategy is to simply say that climate change is a health risk, a risk to peace and prosperity, a risk to humanity’s survival – that the climate change story is our story as a species.
This is not about mobilizing the muscle of co-benefits to make the climate change narrative more robust or appealing. It’s about merging the co-benefits and climate change itself so thoroughly that they become one and the same.

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