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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.

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