Skip to main content Skip to main navigation
Skip to search input

ESG Impact: What you need to know - September 2023

This month we report on Australian companies’ challenges in meeting net-zero targets, some breakthroughs on the way to a circular economy, a gap in funding for biodiversity solutions, plus a trailblazing sustainability linked loan that puts the emphasis on social impact.


International Energy Agency updates its net-zero emission scenario 

The International Energy Agency has released an update to its Net Zero Emissions by 2050 Scenario (NZE Scenario), which reflects real-world progress since its 2021 report, Net Zero by 2050: A Roadmap for the Global Energy Sector.


The IEA works with governments and industry across the world to shape a secure and sustainable energy future. Its NZE Scenario draws on the latest data and analysis to determine what the global energy sector would need to do to play its part in keeping the 1.5°C goal within reach.


The 2023 update reflects significant changes to the energy landscape over the past two years. This includes the post-pandemic economic rebound and the huge growth in some clean energy technologies, as well as the increased investment in fossil fuels.


Under the updated scenario, the annual rate of energy efficiency improvements doubles, sales of electric vehicles and heat pumps rise sharply, and energy sector methane emissions fall by 75 per cent. The IEA notes that these strategies combined will deliver more than 80 per cent of the reductions needed by the end of the decade.


Why does it matter?

Limiting global warming to 1.5°C remains possible due to the record growth in clean energy technologies. In the IEA’s 2021 report, for example, the share of emissions reductions in 2050 from technologies under development was almost half, and that figure has fallen to about 35 per cent in its updated NZE Scenario.


However, momentum needs to increase rapidly in many areas, and remaining on the net-zero pathway will require almost all countries to bring forward their targeted net-zero dates. Staying on target also hinges on a significant increase in investment – in the updated scenario, global clean energy spending rises from USD 1.8 trillion in 2023 to USD 4.5 trillion annually by the early 2030s.


The 2023 NZE Scenario outlines a steeper path to achieving net zero emissions by 2050 than the 2021 scenario, and more will need to be done after 2030. However, it also recognises that achieving net-zero energy sector CO2 emissions by 2050 will depend on effective global co-operation.


Updated building code increases energy efficiency

From 1 October, all new homes in Australia will be required to meet more stringent minimum standards of accessibility and energy efficiency under the Building Code Board’s 2022 National Construction Code (NCC). The NCC establishes minimum standards for safety, health, amenity, accessibility and sustainability in specific buildings.


Announced last year, the update increases the minimum level of thermal performance to the equivalent of 7 stars under the Nationwide House Energy Rating Scheme (NatHERS).


The updated NCC also includes the Liveable Housing Standard, which sets out technical provisions to enable dwellings to better meet the needs of the community, including older Australians and people with mobility limitations.


Why does it matter?

Residential buildings are responsible for almost 8 per cent of Australia’s energy use, 29 per cent of all electricity use and 11 per cent of greenhouse gas emissions. Changes to the NCC are expected to result in significant carbon abatement and will bring Australia more in line with global standards for the energy efficiency of new homes.


Changes to the NCC will make new homes more comfortable to live in, and updates to the minimum energy efficiency requirements are expected to help new homeowners save an average of AUD 183 on their power bills every year.


While the latest code was adopted by states and territories on 1 May this year, some states, such as Victoria, have extended the transitional arrangements.


TNFD releases final framework

The Taskforce on Nature-related Financial Disclosures (TNFD) has released its final recommendations for business and finance to integrate nature into decision making.


The risk management and disclosure framework sets out to identity, assess and manage nature-related financial risks and opportunities. The recommendations are expected to be integrated into accounting standards via the International Sustainability Standards Board (ISSB).


As a member of the TNFD Stewardship Council since 2021, the Australian Federal Government has supported and funded the design and development of this global framework. Australia has also commissioned TNFD pilots across five value chains, including critical minerals mining, natural gas extraction, domestically-sourced fresh beef and salmon, property development and building construction, and domestic cultivation of cotton for export.


Why does it matter? 

The United Nations estimates that more than USD 44 trillion, or half of the world’s GDP, is moderately or highly dependent on nature and its services.


The UNEP FI recently noted that a lack of data on nature-positive expenditure from the private sector also highlights the need for a more robust mechanism for reporting and disclosure. Businesses are more dependent on nature – whether directly or within their supply chain – than had been previously understood.


The newly-released framework and its guidance are expected to tackle these issues by improving accountability and transparency globally. The framework is also designed to encourage businesses and financial institutions to shift towards nature-positive actions.



Companies fall short on climate targets

Carbon emission-reduction targets are proving challenging to achieve, with a survey commissioned by Viridios Capital showing one third of Australian companies are struggling to hit the mark.


The survey includes responses from more than 200 ESG and sustainability professionals across a range of Australian sectors, including primary industries, manufacturing and construction, wholesale and retail trade, transport and logistics, professional services, and public sector support.


Along with insights into progress on achieving carbon targets, the survey respondents also revealed concerns about the Federal Government’s tightening of baselines under the Safeguard Mechanism policy, which requires companies that emit more than 100,000 tonnes of carbon a year to reduce their carbon footprint by almost 5 per cent a year to 2030. Half of those surveyed said they were sceptical that the new baselines for heavy emitters would be achieved.


Why does it matter?

The results of the survey are representative of a maturing market. Many of these companies may have started out with strong targets but, when theory is put into practice, they discover that they may have been too ambitious. Concerns around greenwashing may also be causing some companies to reassess the ambition of their climate goals.


Research from Climateworks Centre shows almost half of all companies listed on the ASX200 have a net-zero target, and these commitments cover 96 per cent of the total ASX200 reported scope 1 and 2 emissions. As the market continues to mature and climate goals are revised in line with what may be achieved in practice, we can expect these targets to be more informed and achievable.


It’s also important to note that the majority of respondents in the Viridios Capital survey believe Australia’s emissions policy is heading in the right direction.


Circular economy in the spotlight

The United Nations International Day of Awareness on Food Loss and Waste Reduction on 29 September has put the spotlight on fighting waste through a circular economy.


Retail giant Woolworths has partnered with sustainability-focused startup Goterra to tackle its food waste. Goterra’s food waste management system, located at its new facility in Sydney’s Wetherill Park, uses insects called black soldier fly larvae to break down food waste onsite and turn it into feedstock and organic fertiliser.


Woolworths will be the new facility’s foundation customer, sending the food waste from its stores across the Sydney region that is not appropriate for hunger-relief charities. Woolworths has been utilising Goterra’s technology in a small-scale trial across its ACT stores since 2020.


Meanwhile, Australian engineers from RMIT have recently developed a way to make concrete that is 30 per cent stronger by converting waste coffee grounds into biochar using a low-energy process.


The extraction of natural sand typically used in concrete has a significant impact on the environment and the use of coffee grounds presents a win-win by replacing a portion of the sand while making concrete even stronger.


Why does it matter?

In October last year, environment ministers across the country, led by Federal Minister for Environment and Water Tanya Plibersek, agreed to work with the private sector to design out waste and pollution, keep materials in use and foster markets to achieve a circular economy by 2030.


Woolworths’ work with Goterra presents an innovative way to address food waste. And, with Australia generating 75 million kilograms of ground coffee waste every year – most of which goes to landfill – its conversion into building materials is a welcome addition to the circular economy.


Approximately 50 billion tonnes of natural sand are used in construction projects globally every year, and the coffee-grounds innovation may help the construction industry to explore alternative, sustainable raw materials.



New sustainability linked loan targets social impact

Australian Unity has sealed an innovative sustainability-linked loan (SLL) deal with Westpac, connecting financing to a framework that puts a value on its social impact.


The AUD 50 million loan creates an incentive for the health, wealth and care group to increase its community and social value. It is aligned to the group’s performance against agreed key performance indicators and is measured by its Community and Social Values Framework (CSV).


Australian Unity’s CSV framework, devised with not-for-profit consultancy Social Ventures Australia, assessed the group’s social impact to be valued at AUD 1.76 billion in the 2023 financial year. The contribution is evaluated over three priority areas: lifelong wellness, economic empowerment, and strong communities.


While the majority of deals in the ESG space target environmental goals, this SLL focuses on the social aspects. “We haven’t dismissed the importance of environment, but as a community-based organisation we were formed to help people solve the issues they face in their everyday lives,” says Adam Vise, Group Treasurer and General Manager, Strategy and Impact at Australian Unity. “Having this central purpose meant we had an attraction to the ‘S’.


“Australian Unity and Westpac have laid the first brick in the road of a wellbeing capital market – completely private sector, completely commercial, and completely scalable at delivering social value,” adds Vise. “There’s an opportunity for capital to flood into this, just as it is to the clean energy transition.”


Westpac economists discuss commodities in transition

In a recent video, Westpac economists Justin Smirk and Elliot Clarke discuss commodities in transition, focusing on the global supply and demand for coal and LNG. China’s growing EV fleet, Justin says, will likely make a “meaningful dent in their import of crude oil” and impact “global demand for crude oil in that space”. While the growth in EVs will also increase the demand for coal, it will lead to lower carbon emissions compared to an ICE fleet. Meanwhile, in the absence of regional carbon pricing, coal fired generation will remain the main option for developing Asia.

Browse topics


©2023 Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141, AFSL233714 (‘Westpac’).  References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.


Things you should know 

We respect your privacy: You can view our privacy statement at Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.

This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.



This information has been prepared by the Westpac Institutional Bank and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract.  To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements.  The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts.  Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.  


Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument. 


Author(s) disclaimer and declaration:  The author(s) confirms that no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material.  The author(s) also confirms that this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate.   


Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.


Additional country disclosures:


Australia: Westpac holds an Australian Financial Services Licence (No. 233714).  You can access  Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact.  To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.


New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address .  


Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.


U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM.  All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269.   Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.


The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.


UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586).  The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request. 

Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation.  WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’).  WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483.  In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.  

This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”.  Westpac expressly prohibits you from passing on the information in this communication to any third party. 

This communication contains general commentary, research, and market colour.  The communication does not constitute investment advice.  The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.

Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.

To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.