Date: 2021-11-19 05:04:28
Australia needs to step up on climate change or face the financial and investment consequences, the country’s top economic bureaucrat has warned.
“There may be aspects that do not align with Australia’s national interest,” Treasury Secretary Steven Kennedy told a briefing on Friday.
“We do not have to like what’s happening but we do have to be engaged and involved.”
He acknowledged powerful forces are now at play in sustainable investment, disclosure and international capital flows.
“Australia will need to take further steps to meet these expectations,” he said at the event hosted by the Centre for Policy Development and research body ClimateWorks.
Macquarie Group chief executive Shemara Wikramanayake said clarity is needed for collaboration between government and business.
“Ultimately what the private sector needs is for the public sector to set the priorities and the targets,” she said.
“Sadly climate change is upon us and we are having extreme weather events, melting of the glaciers, rising sea levels, so there are a lot of communities who are going to be impacted.”
In response, adaptation is becoming a key feature of an asset – from underground cables in Finland built to survive freezing winters to geo-hazard warnings on geothermal assets in the Philippines.
“It’s not just a problem, it’s an opportunity,” Ms Wikramanayake said.
John Morton, climate counsellor at the United States Treasury, said the new urgency in the past few months meant targets that were once seen as almost impossible were now back on track.
But he warned countries adopting a 2050 net zero carbon emissions target also needed credible plans for 2030.
“It would be good, it would be meaningful, to see strong progress from Australia in setting intermediate targets that can be credibly looked at by the international community to better understand your pathway to those trajectories,” Mr Morton said.
The focus of the US Treasury is on mobilising $US100 trillion ($A137 trillion) in private sector capital needed for clean and sustainable infrastructure, and not just in energy, over the next 30 years.
“Capital of that size has to come from the private sector, it can’t come from the public sector,” he said.
But the shift needs to be enabled by governments through policy and regulatory signals so capital markets understand the transition is predictable and significant.
“There are economic consequences to being left behind, both for companies, for industries and indeed for countries,” Mr Morton said.
Unlike the US, Australia’s position is that climate disclosure should be voluntary not mandatory. However Dr Kennedy conceded “it is absolutely clear that more prescriptive disclosure is becoming the global norm”.
The Treasury boss said he began working on these policy issues a decade ago and it was “pleasing” financial regulators had now stepped up their activity.
The United Nations COP26 climate conference held in Glasgow earlier this month gave some important pointers, he said.
A new standards board, the International Sustainability Standards Board, was created this month to meet demand from international investors for companies to report on climate and other environmental, social and governance matters.
Ms Wikramanayake said there needed to be an orderly transition for the hard-to-abate fossil fuel sector to avoid blackouts, price surges and loss of jobs and exports.
Coal ports could be repurposed for containerised shipping or for hydrogen and ammonia, for example.
Australian officials will be involved in developing a global baseline of sustainability-related disclosure standards for investors and other capital market participants.
Dr Kennedy said the new board will build on the Task Force on Climate-Related Financial Disclosures’ regime of voluntary disclosure for companies on financial risks.
Australia has been a relatively strong performer on climate financial disclosure as it becomes “mainstream”, including when selling government bonds, he said.
“Investors all want to know about it.”