Making Waves: Australian Sustainable Finance Initiative
Anna Skarbek Climate Works
Simon O’Connor Responsible Investment Association Australasia
The Australian Sustainable Finance Initiative emerged from industry discussions at a United Nations Environment Programme Finance Initiative in 2018. It brings together major banks, insurance companies, peak bodies and scholars into a self-funded collaboration aiming to align financial services with long-term international commitments such as the UN Sustainable Development Goals (SDGs) and the Paris Agreement.
On 24 November, ASFI launched a sustainable finance roadmap establishing new frameworks, standards and practices. It will ensure that investing, lending and insuring facilitates key goals like the achievement of net zero emissions by 2050.
Industry leaders realise they must consider environmental, social and ethical issues that once might have been judged irrelevant. They know many surveys show consumers are demanding their financial services invest ethically – and they also understand that such investments generally deliver better long-term returns.
Furthermore, regulators now consider a business assessment of climate risks to be a fundamental component of compliance for anyone who delivers financial services.
ASFI is aligning with a shift taking place all over the world, as major jurisdictions conduct reform programs for their finance systems around sustainability.
In these discussions of ‘sustainable finance’, the word ‘sustainable’ does double duty. It refers to the financial sector providing capital to low-carbon businesses and other projects aligned with environmental and social sustainability. It also refers to the growing awareness by regulators that the finance system’s own sustainability necessitates minimising exposure to companies and assets increasingly at risk as consumers eschew carbon-intensive products, or from economic damage from physical impacts of climate.
ASFI’s roadmap will codify this evolution of leadership and culture, formalising methods for managing climate risks as a matter of normal due diligence. It will catalyse market shifts towards greener assets, as new regulatory and policy settings support the government and the nation to achieve the objectives of both Paris and the SDGs.
Much investment beyond our shores will also be required in order to achieve the SDGs. Sustainable finance presents an opportunity, and reflects a growing appetite, for Australian capital to flow to our neighbouring developing nations towards projects that contribute to strong social and environmental outcomes, and aid in the delivery of the SDGs.
Sustainable finance presents opportunities for Australian business to attract capital for projects which help provide solutions or avoid harm in the context of changes we know are coming.
Many of the biggest financial institutions are now leaning into the climate challenge rather than simply waiting for the market to adapt. Given the urgency of the problem, that proactivity matters. If you’re not on the beach, you can’t ride the surf. Sometimes, however, it’s not enough just to wait. If the conditions aren’t yet right in your industry, step in and make waves yourself!