ESG Impact: What you need to know - November 2023
This month we look ahead to COP28 and the first Global Stocktake to gauge worldwide progress toward the Paris agreement goals, and we report an upswing in activity around sector-specific transition, and much more.
POLICY
COP28 includes first global stocktake
Carbon-cutting policies will be in the global spotlight this month with the United Nations-led COP28 climate summit kicking off on 30 November. Held at the Expo City in Dubai, the summit’s program incorporates four key themes: technology and innovation, inclusion, frontline communities, and finance.
As the energy crisis continues to heighten, new goals and targets are expected to be introduced during COP28. Key priorities for the summit include:
- The first Global Stocktake for countries and stakeholders to gauge collective progress towards meeting the goals of the Paris Climate Change Agreement. The stocktake aims to inform the next round of climate action plans, or nationally determined contributions (NDCs) under the Paris Agreement, which will be put forward by 2025.
- A global goal on adaptation, with parties agreeing on a framework and target for safeguarding vulnerable communities. Australia’s Assistant Minister for Climate Change and Energy, Senator Jenny McAllister will play a key role in facilitating the summit’s adaptation consultations.
- Building on the agreement from COP27 to establish a fund for loss and damage from climate change, this year’s summit aims to create the relevant funding arrangements.
Australia is a member of the transitional committee that will make recommendations for the fund’s design.
Why does it matter?
While all countries are required to adapt to climate change, the most vulnerable nations are among those least equipped to respond. A fund for loss and damage will help to create a just transition.
Earlier this month, Australia signalled its commitment to building resilience to climate change in the Pacific Islands nation of Tuvalu, which is one of the world's most at-risk countries from climate change. It includes an additional contribution of AUD16.9 million for the next phase of the Tuvalu Coastal Adaptation Project, as well as an historic climate refuge pact, which creates a pathway for 280 Tuvalu citizens to migrate to Australia each year as the threat of climate change increases.
A just transition is also a national focus for Australia, with the government’s announcement of the establishment of a Net Zero Authority to support workers in emissions-intensive sectors to access new employment and skills as the net-zero transformation continues.
Treasury releases Sustainable Finance Strategy Consultation Paper
Commonwealth Treasury has released its much-anticipated Sustainable Finance Strategy Consultation Paper, which proposes a range of measures to mobilise the private investment required for Australia’s transition to net-zero.
It features three pillars, with the aim of supporting a number of proposed priorities. They include:
- Improving transparency on climate and sustainability, with priorities such as a framework for sustainability-related financial disclosures, the development of a sustainable finance taxonomy and a labelling system for investment products marketed as sustainable.
- Building financial system capabilities, with priorities such as addressing data and analytical challenges, enhancing market supervision and enforcement, and ensuring fit-for-purpose regulatory frameworks
- Boosting the Australian Government’s leadership and engagement through the insurance of sovereign green bonds (the first of which is expected in mid 2024), as well as promoting international alignment and positioning Australia as a global sustainable leader.
The closing date for feedback submissions to Treasury is 1 December 2023.
Why does it matter?
A consistent framework for sustainable finance across all banks is expected to give investors more confidence, minimise greenwashing and boost the integrity of green investments.
A framework will also provide transparency for all market participants on what is suitable to be claimed as sustainable finance, while providing more certainty to the finance sector about how regulatory frameworks in this area may develop.
Sustainable finance presents a significant competitive advantage for Australia in the global economy. A robust framework is expected to help Australian companies remain competitive in global capital markets.
After considering stakeholder feedback to the consultation paper, Treasury will publish an implementation roadmap for the Sustainable Finance Strategy.
CORPORATE
Climate transition plans receive sector-specific guidance
The UK’s Transition Plan Taskforce (TPT) has launched a consultation on its sector-specific guidance for preparers and users of climate transition plans. Its seven “Sector Deep Dives” are for asset managers; asset owners; banks; electric utilities and power generators; food and beverage; metals and mining; and oil and gas.
TPT recommends that businesses disclose assumptions that may impact their transition plan, and that transition plans should be transparent about data limitations and any steps taken to mitigate identified limitations.
Launched in the UK in 2022, the TPT aims to develop clear standards for climate transition plans. Consultation for the Sector Deep Dives will be open until 29 December 2023.
Why does it matter?
The TPT’s Sector Deep Dives provide more guidance for climate transition plans, as well as valuable knowledge-sharing around various industry approaches.
More climate transition guidance is also being created in Australia. In July this year, the federal government announced the development of net-zero plans for six sectors: electricity and energy, industry, built environment, agriculture and land, transport and resources. The plans include policy actions and technology investments to enable the sectors to contribute to the government’s overall climate targets.
The Climateworks Centre at Monash University is currently undertaking sector scenarios and modelling to envisage how different levels of climate ambition might look for the Australian economy.
It finds that sectors move at different rates on a least-cost pathway to net-zero and that ensuring the electricity sector rapidly reaches near zero will underpin actions in other sectors, especially the built environment, industry and transport.
WESTPAC IN ACTION
Westpac announces new reporting suite
Westpac has released its FY23 reporting suite, which includes a Climate Change Position Statement and Action Plan, Nature Capital Position Statement and Sustainable Finance Framework.
To support our ambition to become a net-zero, climate-resilient bank, our Climate Change Position Statement and Action Plan provides the framework within which we seek to conduct business, support customers and engage with stakeholders. It also outlines the actions that drive our focus and guide our people.
Our Natural Capital Position Statement defines our ambition to become a nature-positive bank. It sets out our principles relating to nature and natural capital, as well as the initial steps required to understand the key nature-related risks and opportunities for our business and customers.
Our Sustainable Finance Framework outlines how we consider sustainable finance transactions and classify them as Green, Transition, Social or Sustainability, using our Sustainable Finance Taxonomy or industry standards, principles and guidance to guide this classification.
It also includes Westpac’s Sustainable Finance Targets, which are the amount of qualifying sustainable lending and bond facilitation we are seeking to achieve to help create and enable positive sustainability outcomes.
Westpac held a Sustainability market update this morning, where we shared our sustainability progress Sustainability market update presentation.
Spike in renewable energy investments
The drive to boost investment in renewable energy projects is gaining momentum with an article published in Westpac IQ showing that the investment project pipeline has grown to AUD105 billion.
The analysis draws on statistics from the Investment Monitor database, compiled by Deloitte Access Economics. It shows that, as at the September quarter 2023, the investment pipeline has progressively increased from AUD46.5 billion at the end of 2019.
The $105 billion pipeline includes some AUD36 billion of projects either under construction or with a firm commitment, and AUD69 billion of projects under consideration.
Sustainable Finance Q3 update
Westpac IQ’s quarterly sustainable finance market update provides the latest snapshot of global trends and Australia-New Zealand observations, where sustainable debt issuance totalled USD30 billion during Q1-Q3 2023.
Aligned to the global market, sustainable bonds have dominated sustainable debt issuance in the Australia-New Zealand market this year, with Green Bonds contributing USD11.5 billion or 37 per cent of total issuance in the year to date.
The update also includes a list of notable use-of-proceeds and sustainability-linked issuances, including NBN Co’s AUD850 million Australian Green Bond issuance, with Westpac acting as a joint lead manager in the deal. A new five-year benchmark, it positions the NBN as the largest corporate bond issuer in Australia. Read about other issuances here.
Related articles
Browse topics
Disclaimer
©2024 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “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 Westpac.com.au. 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.
Disclaimer
This information has been prepared by the Westpac 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 (a) 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; (b) 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; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.
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 www.westpac.co.nz .
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.