Sustainable Finance

(completed June 2019)

Australia’s finance sector will be critical to a sustainable and resilient future for the country. Finance is a key lever for change, and plays a major role in shaping the world we live in. The sustainable development needs of Australia and the world require the active participation of the finance sector and represent a significant strategic opportunity.

Sustainable finance refers to any financial service – including banking, insurance, superannuation and other investment vehicles – that integrates environmental, social and governance (ESG) impacts for the lasting benefit of society and the environment.

For this project, Climate-KIC Australia engaged local and European experts to highlight alignment between financial and investment frameworks of Australia and the EU and to identify how the European sustainable finance effort can inform Australian action.

The two main goals we wanted to achieve were:

  • Introducing and explaining the EU Action Plan to the Australian financial and governmental landscape and
  • Comparing the European measures with the current Australian financial landscape and identifying where opportunities and risks exist for both policymakers and financial institution.

In order to achieve this, we split the project into two components:

  • A series of public and invitation-only events in Sydney, Canberra and Melbourne with two leading European industry experts on sustainable finance targeting the Australia business/financial, governmental, regulatory and social sector, and
  • A research project (with UTS) to understand what this EU Action Plan might mean for Australia/help Australia unlock its sustainable finance potential.

On the basis of a report issued by a High-Level expert group on sustainable finance, the European Commission released its Action Plan for Sustainable Finance in March 2018. This plan is a program of policies currently being adopted in the EU.

Two members of the expert group, Ingrid Holmes of Hermes Investment Management and Michael Schmidt of Deka Investment, brought their direct experience of the role of the finance sector in future-proofing the economy.

Over the course of five days, the experts discussed with over 250 people across all sectors how lessons from the EU can help to unlock Australia’s finance potential in the face of increasingly urgent need for action on climate change. The public events featured open panel discussions with not only the EU experts and members of the UTS research team, but also key advocates for an Australian Sustainable Finance Roadmap, such as Emma Herd, CEO of Investor Group on Climate Change, Anna Skarbek, CEO of ClimateWorks,and Simon O’Connor, CEO of Responsible Investment Association Australasia.

“While the process of implementing the EU Sustainable finance plan is still underway, it is encouraging to see that the experience is already providing helpful insight for other countries looking to see the benefits and avoid the risks to their financial sectors from climate change,” said Ingrid Holmes. Michael Schmidt noted that the European experience had highlighted the importance of an inclusive and consultative approach. “For any plan on sustainable finance to be effective a fully coordinated and multi-dimensional policy approach is essential – one that aims at synchronising changes in the financial system with the economy as a whole.”

The second part of the project, a research project conducted by the Centre for Business and Social Innovation at UTS Business School, and the Institute for Sustainable Futures, reveals that Australian financial practitioners and experts believe that Australia has a good foundation to adapt best practices from the EU, however, action has been piecemeal.

Dr Scott Kelly, one of the lead researchers from UTS said “From the interviews that we conducted across the Australian financial sector a consistent message was that Australia could do more to encourage sustainable finance.” In his view there was general agreement across the financial sector that Australia requires clarity and policy certainty around sustainable finance in order to meet future sustainability and climate targets.

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. The final report incorporating insights from the events was released in mid-June.

“Climate-KIC Australia is delighted to support this research and sharing of expertise between the European Union and Australia around how the financial sector can incorporate climate change factors and sustainability,” said Chris Lee, Climate-KIC Australia CEO. “Reflecting on the European experience at this juncture is timely, as these insights can directly contribute to existing Australian initiatives.”

Shortly after the conclusion of the expert tour, Australia launched its own business-led sustainable finance initiative, with support from leaders in the banking, investment and insurance sectors. No comprehensive support from the Australian Government at this stage. Reference to EU Action Plan in their launch media release. Emma Herd, Anna Skarbek and Simon O’Connor are now part of the steering committee of the Australian Sustainable Finance Initiative.

Outcomes:

  • Improved awareness, particularly among financial regulators, major financial institutions, industry groups and policy makers, of key programmes in development under the EU Sustainable Financial System adoption
  • Key decision makers appraised of key policy and regulatory requirements to facilitate an enhanced role for the financial sector in achieving sustainable outcomes.
  • Build relationships between Europe and Australia with the aim of enhancing bilateral action to boost the role of finance in achieving sustainability outcomes and highlighting European expertise

 

 

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.

Project partners

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