Asia-Pacific

IGCC Welcomes Australia-New Zealand Climate Finance Pact 

The two nations have agreed to hold an annual Climate and Finance Dialogue to align sustainable finance frameworks and accelerate policy implementation. 

An agreement by Australia and New Zealand to tackle climate change collaboratively alongside other Pacific countries to ensure regional “resilience and prosperity” is positive indicator of long-term focus in sustainability, according to the the Investor Group on Climate Change (IGCC). 

Amy Quinton, Senior Policy Manager at the IGCC, told ESG Investor that the inter-nation dialogue signals a “welcome commitment [in] tackling climate change and transitioning to a climate-resilient, zero carbon economy”. 

“This commitment signals a long-term focus on sustainable investments and opportunities in both countries,” she added. “Prioritising alignment and coordination is critical to investors efficiently allocating capital into climate solutions.” 

Under the agreement, climate and finance ministers from both countries agreed to convene an annual Australia–New Zealand 2+2 Climate and Finance Dialogue, as well as establish a joint working group to support climate-related policy implementation. 

The two nations also agreed to establish a Net Zero Government Working Group to bolster the decarbonisation of public services, climate‑related disclosures, and sustainable procurement.  

Ministers also said they will collaborate to align sustainable finance frameworks and tools in an attempt to “enhance interoperability and support businesses operating across the economic region”. 

Confronting climate change 

Quinton underlined that climate change’s physical impacts present “significant risks” for Australian and New Zealand lawmakers, communities, companies  and investors.  

“It is great to see a clear focus on working together on adaption and resilience measures, which is a major challenge for both Australia and New Zealand,” she said.  

“If implemented effectively, the objectives outlined in the agreement will foster a more stable and predictable investment environment, giving investors greater confidence in deploying capital in both countries.” 

Australia has been increasing its focus on climate, with the country set to introduce a green financing programme in 2024 following the development  of a sovereign green bond framework.  

In May, the UN Principles for Responsible Investment (PRI) established a Collaborative Sovereign Engagement on Climate Change initiative for investors to support governments in mitigating climate change.  

The initiative is being piloted in Australia to support climate policy action at a “critical juncture”, following the government’s introduction of its Climate Change Act and other major reforms, according to the PRI.  

The IGCC – a collaboration of Australian and New Zealand institutional investors focused on the impact of climate change on investments – recently welcomed the establishment of a Net Zero Authority, that will co-ordinate decarbonisation opportunities across the Australian economy, including supporting the efficient allocation in sectors including energy, transport, industrials, and agriculture. 

The Australian Prudential Regulation Authority (APRA) recently published a Statement of Expectations and Statement of Intent that includes climate-related financial risk as a priority area of focus for the first time, which it said reflects a growing awareness of the potential impact of climate change on the financial system and the need for institutions to adapt. 

Prime Minister Anthony Albanese’s Labour Government has set a legally binding target to cut CO2 emissions by 43% from 2005 levels by 2030, as well as committing to reach net zero emissions by 2050.  

New Zealand has also made commitments on climate including a pledge to halve its greenhouse gas emissions by 2030, as well as reaching net zero by 2050.  

A November 2022 report by the IGCC, however, found “disappointing progress” in new net zero commitments from the New Zealand investment industry, that was slower than Australia and “significantly slower” than international leaders, such as the European Union. 

Implementing interoperability 

Quinton stressed the importance of regulatory alignment on climate-related matters in creating a “more harmonised and consistent” investment landscape that “reduces regulatory complexities, facilitates cross-border investments, and promotes capital flows”. 

“For investors, it’s positive to see progress on both countries working together to promote opportunities to align investments with climate goals, access new sustainable investment products, and gain transparency on climate-related risks and opportunities,” she said.  

Quinton said that both nations’ focus on sustainable finance must be on implementation to “drive a just and orderly transition to net zero emissions, improve resilience to climate impacts and unlock capital flows into solutions”. She added that for investors to effectively manage climate-related risks and deploy capital towards climate solutions, greater alignment and interoperability between Australia and New Zealand’s disclosure and sustainable finance frameworks is required.  

Quinton expects an “immediate focus” on interoperability of climate-related disclosures, with New Zealand entities due to commence mandatory reporting later this year. Additionally, Australia will introduce similar mandatory reporting requirements underpinned by the International Sustainability Standards Board.   

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