I acknowledge the Gadigal people of the Eora Nation and pay my respects to their Elders past, present and emerging.
I extend that respect to all First Nations people attending today.
The Uluru Statement from the Heart is a majestic document.
I would like to single out the contribution of Professor Marcia Langton who is with you later today. I want to recognise her lifelong contribution to First Nations equality, empowerment and a national reconciliation. Her resolute advocacy for a Voice to Parliament has been joined by the Albanese Government – a cause we hope to realise through the referendum this year.
To Louise Davidson, Deb Blakey and the team at the Australian Council of Superannuation Investors thanks for the kind invitation to be part of today’s event.
I want to acknowledge the important Role of ACSI brings to financial markets: an understanding that institutional owners have a fiduciary obligation to asset stewardship. A capacity to take a long‑term view to the companies in which you are invested and a focus on financially material environmental and social impacts of business activity.
We want to improve the tools available to you and other investors to make smart decisions that are good for fund members and good for the environment.
Stepping up to the challenge
The challenge is great – to limit global warming to 1.5 degrees, we have to reduce global emissions to net zero by 2050.
The Albanese Government has committed Australia to do it, and to hit a 43 per cent target by 2030.
This won’t be a walk in the park.
A massive shift in investment is also needed: the Global Energy Transition Commission says the shift will need to be around $3 trillion per year, with a peak of $4 trillion per annum globally by 2040.
That figure includes around $1.3 trillion in energy generation and $1.1 trillion in transmission and storage.
That same report says that buildings and transport will require $500 billion and $280 billion per annum in new investment annually.
Collectively, that all makes up around 1.3 per cent of global GDP.
It means, there will be an international competition for capital, and a strong desire to see it effectively deployed.
Countries that move quicker and are decisive will be advantaged. Those that malinger will be punished.
If Australia is to attract the capital to make the transition, leadership and stable policy is needed. We are providing both.
In our first year:
- We’ve legislated the goals and set out the steps that the Government will take. As my colleague Chris Bowen has made clear, this sends an important signal to investors.
- We’re addressing the challenge of carbon intensive industry by securing the passage of the Safeguard Mechanism through Parliament, ensuring we decarbonise without deindustrialising.
- We’ve announced our National Electric Vehicle Strategy to address transport emissions, which are our third largest source of emissions. We’ve passed legislation to make electric cars cheaper, by removing fringe benefits tax.
- We’re supporting households to help them make informed decisions on reducing their emissions.
- We’re Rewiring the Nation, modernising the electricity grid and supporting a clean energy future. We have made significant steps in wind power.
- And we’re helping to transform regional industries and helping people in regional areas access the opportunities of decarbonisation.
Role of investment and the financial system
We want to make sure that firms, financial institutions and regulators share a common understanding and a common goal, to pursue the huge opportunities that this transformation presents
So, we are rolling out a Sustainable Finance Strategy - an ambitious and coordinated project.
It will be Australia’s own, while aligning with what the rest of the world is doing.
We expect to release the draft Strategy for consultation in the second half of the year.
But we know that this is urgent work, and so the things that we can do now, we are doing now.
Green Bonds
First, we’re introducing a Sovereign Green Bonds Program.
The program enables investors to back public projects to drive our net zero transformation.
And it boosts the scale and credibility of Australia’s green finance market.
We want to put out the biggest possible lure to attract more green capital to Australia.
The Australian Office of Financial Management will engage with the investment community on the Green Bonds Program, with the first issuance scheduled for mid‑2024.
This is a case of actions supporting words. We are not just saying green investment is needed, we are turning up and entering the market, with the capital and the clout of Government, and our Triple A credit rating.
Taxonomy
Investors also need a common language a standard to measure what is green and what is sustainable.
So we are working on a sustainable finance taxonomy.
We’ve spoken before about the critical role we see for a taxonomy – one that aligns with global standards but has an Australian accent.
Capital markets can’t work efficiently unless there is transparent and credible information – and Australia can’t sit back while new rules about what is green and sustainable are written offshore.
So, a taxonomy is critical.
It will provide common agreed standards and definitions about the sustainability characteristics of different investments.
The Australian Sustainable Finance Institute (ASFI) describes the taxonomy as a ‘foundational piece of the sustainable finance architecture. We agree.
But it’s complex, and it’ll take time and collaboration to get it right.
Partnership is essential – your insight, experience, together with the authority of Government will give confidence to investors that produce are true to label.
We have some catching up to do. Europe, Singapore and other leading markets that began this process some time ago.
During the next 12 to 18 months, the Government will provide direct support to ASFI to co‑fund the initial development phase for an Australian sustainable finance taxonomy.
It will be a genuinely collaborative effort between Government and industry.
ASFI has shown strong leadership on this initiative in recent years and has laid the groundwork.
So, it’s no surprise that the initiative has broad support from across the financial system.
This initial phase allows us to maintain the momentum.
And the Council of Financial Regulators’ Climate Working Group, which includes Treasury, will oversee this initial phase.
This will ensure there is direct input from government, helping to align the taxonomy development with our broader sustainable finance policy objectives and wider market and regulatory trends.
As it develops, the taxonomy will form a major component of the wider Sustainable Finance Strategy.
Greenwashing
Third, we have announced an additional $4.3 million in the next financial year for ASIC to continue its focus on greenwashing.
Sustainable business strategy must start in boardrooms and investment committees, not in marketing departments.
This funding allows ASIC to increase its surveillance of suspected greenwashing by listed companies, superannuation funds and investment managers.
ASIC will also be able to pursue larger and more complex matters, further clarifying market expectations and deterring misconduct.
It will also ensure that ASIC keeps pace with overseas regulators, who are also concentrating on greenwashing related enforcement.
Let me be clear: this is about ASIC enforcing existing laws. It’s not about introducing new obligations.
Greenwashing is already one of ASIC’s priorities – market participants are acutely aware of this focus. We want them to have the resources to do it right.
In fact, it is central to the development of credible sustainable finance markets.
Greenwashing corrodes the credibility of sustainable finance markets.
If there are companies out there making misleading claims, saying their offerings are greener than they really are, they’re getting a leg‑up on everyone else who is doing the right thing.
And that completely undermines investor confidence.
Claims made in the market need to be accurate and substantiated.
We want investors to see the opportunities in green investment. They can only do that if they know the market is fair dinkum.
And so, this money for ASIC is coming at an important time.
Climate disclosure obligations
I can also update you on plans to develop an Australian climate risk disclosure framework.
For all the reasons we’ve been talking about, around investor confidence in the transition to net zero, there’s broad support for mandatory climate disclosure requirements.
Essentially, they will provide investors with credible and comparable information.
In December, we started consulting on an Australian climate risk disclosure framework.
We asked for comment on applying standardised climate‑related financial disclosure requirements to large businesses.
We’ve done that in the knowledge that most large businesses are already disclosing voluntarily and are well placed to lead the way.
We asked for comment on timing and taking a phased approach.
Our initial view is that mandatory reporting requirements should be phased in over time – both in terms of entities covered and the reporting that is required.
Submissions to the consultation expressed almost universal support for the Government’s commitment to implement internationally aligned reporting standards, and for basing Australia’s standards on those being developed by the International Sustainability Standards Board.
The most contested issue was whether or not the existing liability settings for forward‑looking financial statements are appropriate in the context of climate‑related reporting.
We’re giving careful consideration to the submissions ahead of further consultation later this year.
Closing remarks
We will know that the Sustainable Finance Strategy has worked when we’re no longer talking about it.
We’ll know it has worked when Sustainable Finance is just called Finance.
It’s just the stuff we do.
We can’t get there in one step – that’s what the strategy is all about and the work you’re involved in as all about.
But we can’t do it alone. All these plans that I’ve talked about today are about bringing investors along with us, so that you have the knowledge, the incentives, the tools and the certainty and confidence that the Government is working shoulder to shoulder with the investment community – because without you we can’t do it.
Thanks so much for the opportunity to talk to you this morning.