Sustainable Finance: 'We expect industry to play its part'

Grant Robertson signed the Coalition of Finance Ministers for Climate Action. Photo / Supplied

Finance Minister Grant Robertson recently signed New Zealand up to the 44-strong Coalition of Finance Ministers for Climate Action.

He says the coalition recognises that meeting climate goals requires not just environmental policies, but also "climate-fiscal" policies like considering climate change in annual national budgets.

"New Zealand is already well down the track in this respect with the Wellbeing Budget taking into account broader measures of success than economic growth," he says.

Robertson is looking forward to studying the Sustainable Finance Forum's interim report Financing the Future which is being launched today.

The SFF report — and an accompanying opinion by law firm Chapman Tripp — steers company directors in the direction of facing up to the challenge that climate imperatives pose to their businesses; to consider the impact of climate change in their decision-making, and, to disclose such related financial risks to investors.

"The work the forum is doing very much aligns with our Wellbeing approach, which forms the basis of our budget planning and decision-making," Robertson adds.

"New Zealand needs a financial system that serves the needs of its people over the long term, while also nurturing a growing economy.

"That is why we now consider, natural, human and social capitals as well as financial capital in our Budget."

Asked by the Herald if he favours explicit reporting by company directors on risks to their businesses from climate change, Robertson replies: "It would be useful to assist Government planning to get a clear picture of climate change risks across the business sector, so I would welcome that information being publicly available."

While the New Zealand investment tally is relatively light when it comes to the issuance of green and sustainable bonds — just $1.6 billion in 2019 to date ($1b in 2018 and $107m in 2017) — the overall market is growing.

Robertson says the Government is doing its bit by encouraging innovation to help meet the country's emissions targets.

But he stresses "we also expect the industry to play its part".

He points to Budget 2019 which included a $219 million sustainable land use package to support transitions, and multimillion-dollar investments in energy and agricultural emissions research, including the Global Research Alliance.

The Sustainable Food & Fibre Futures fund was established in October 2018, with funding of around $40m per year until 2021/22.

In addition to that, the Government has three funds that do research into climate change: the New Zealand Agricultural Greenhouse Gas Research Centre, the Sustainable Land Management and Climate Change Research Programme and the Global Research Alliance on Agricultural Greenhouse Gases.

Robertson says hydrogen, as a low-emissions technology to replace fossil fuels, would fit within the NZ Green Investment Fund's mandate to accelerate investment to reduce emissions. "The NZGIF is watching hydrogen closely, but it's still pre-commercial and small-scale".

Paul Newfield, who is head of Australia and New Zealand at Morrison & Co, says the biggest challenge on a New Zealand basis is the reasonably shallow capital pools.

"In Australia, you've got however much it is now, $3 trillion or something, in the superannuation industry and that capital tends to be very long-term in nature," Newfield says.

"What that allows them to do — and us as the managers of their capital — is to really focus on outcomes that come 10 or 20 years out.

"Therefore issues like carbon pricing and climate change and broader sustainability issues become front and centre for you ... rather than something you just do to be good citizens."

Newfield — a member of the SFF Leadership Group — says the finance industry now needs to say clearly it wants change to happen.

The Government needs to deliver price signals which sustain through electoral cycles, including with KiwiSaver.

And importantly the finance industry needs to show leadership.

"Part of that is changing our own behaviours and incentives.

"I think part of it is creating products — even if they're small scale to start with — to give people investment options that focus on sustainability, so that those products are sitting there waiting as demand grows."

Read the Sustainable Finance Report here.