This article was originally published by UTS Business School. Read the original here.
Making Australian financial systems supportive of sustainable development: Lessons from the European Union’s Action Plan on Financing Sustainable Growth
A new report: Unlocking Australia’s Sustainable Finance Potential, examines the state of play of sustainable finance in Australia and compares it to the European Union’s Action Plan on Financing Sustainable Growth, offering positive steps forward for Australia’s finance industry and regulators.
Sustainable finance refers to any financial service – including banking, insurance, superannuation and other investment vehicles – that takes into account environmental, social and governance (ESG) impacts for the long-term benefit of society and the planet.
“Financial markets are the lifeblood of an economy and we want to highlight how money flows can support positive outcomes for Australia and the world at large, including addressing climate change, reducing pollution and restoring the planet, and to support decent work,” says report co-author Dr Melissa Edwards.
“Many people would like their retirement savings to be invested in building sustainable growth, and to be informed and have access to tools so they can make ethical choices and understand exactly where their savings are being invested and the impacts of this investment”.
“We interviewed a broad cross section of representatives from the Australian finance industry, and there was broad support for most of the recommendations from the EU´s Action Plan on Financing Sustainable Growth to be adopted in Australia, such as for financial advisors to incorporate sustainability implications when investment advice is given,” says Dr Paul Brown, a report co-author.
“There was a widely shared view that more needs to be done to resolve policy uncertainty at the Federal level in particular, with this uncertainty distorting the Australian market,” he added.
Many countries across the world, including the European Union, have committed to, or are in the process of, building the foundations of a sustainable financial system. These foundations guide regulation, legislation, policy, reporting requirements and responsible governance practices to enable the EU to effectively and efficiently tackle the challenges of the 21st century.
Australia has launched a sustainable finance initiative, with support from leaders in the banking, investment and insurance sectors, but at this stage there is no comprehensive support from the Australian Government.
The report was produced by the UTS Centre for Business and Social Innovation and the Institute for Sustainable Futures, supported by Climate-KIC Australia with funding from the European Union in the frame of the Strategic Partnerships for the Implementation of the Paris Agreement program.
“Australia needs to address sustainable finance goals to reach the Paris agreement targets, help achieve the UN sustainable development goals, and to ensure the Australian finance sector stays up to date in the global economy,” says report co-author Dr Alice Klettner.
“The Reserve Bank of Australia, the Australian Prudential Regulatory Authority and the Australian Securities and Investment Commission are all calling for change,” she says.
The report lists a series of recommendations directed towards different stakeholders in the finance system, as a means to establish an Australian plan for a sustainable financial system.
It compares each of the EU’s ten action points to the current state of play in Australia, with key stakeholders and institutions in the Australian finance ecosystem mapped out, and examines what regulatory, co-regulatory and voluntary practices are needed.
“We need participants in the financial system to measure, disclose and generally improve transparency, to help ensure finance is flowing in ways that improve the health of society and the environment,” says report co-author Dr Scott Kelly.
“Sustainable investment decisions can have a big impact. Australia holds the fourth largest super fund in the world by total market capitalisation, representing a real opportunity to make a significant difference for sustainable investments.”
Read the report here.
The EU Sustainable Finance Project is a project that was run with financial support of the European Union in the frame of the Strategic Partnerships for the Implementation of the Paris Agreement (SPIPA) programme. The SPIPA programme is jointly commissioned by the European Union as a Foreign Policy Instrument Action and the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) in the context of the International Climate Initiative (IKI). SPIPA is implemented by GIZ.