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ESG Impact: What you need to know - May 2024

This edition explores the bumper investment in renewables in the Federal Budget 2024-5, how energy giants are breathing new life into ageing coal-fired assets, sustainability R&D in the red meat and livestock industry, new priorities announced at the First Nations Clean Energy Symposium, and more.


Historic budget for clean energy

The May federal budget unveiled the biggest investment in clean energy in Australia’s history. 


Along with AUD 19 billion to accelerate investment in the ‘Future Made in Australia’ priority industries, including green hydrogen, low-carbon liquid fuels and the manufacturing of clean energy technologies, the budget allocated AUD 566 million to support research and development of Australia’s critical and strategic minerals industry. 


A further AUD 91 million was apportioned to developing the workforce for the clean energy and industry sectors, with AUD 10 million set aside to establish a National Hydrogen Technology Skills Training Centre, in partnership with the Victorian government.


Australia’s clean energy goals were also supported through AUD 8.7 million in funding to provide analysis, oversight and implementation support, as well as reviewing the country’s critical minerals trade policy settings. 


You can read Westpac analysts’ insights on the budget’s  longer-term outcomes for different sectors of the economy here.


Why does it matter?

The record investment in clean energy supports the government’s ambition for Australia to become a renewable energy superpower. It also recognises the country’s comparative advantages due to its abundance of renewable resources like sun and wind, as well as its plentiful reserves of critical minerals required for the net-zero transition. 


The budget’s Future Made in Australia package is also widely viewed as a response to the US Inflation Reduction Act (IRA), which was introduced in August 2022 and includes a USD 369 billion investment in the US energy transition. 


Like the IRA, Future Made in Australia agenda includes targeted initiatives to drive the country’s net-zero transition. Along with funding to support the growth of industries like solar energy and battery manufacturing, it also includes tax incentives for processing and refining critical minerals and green hydrogen production. The incentives will allow businesses in these industries to claim back an extra 10 per cent of their costs, making their future in Australia potentially even brighter.


First Nations Clean Energy Symposium 

Aboriginal and Torres Strait Islander participation in the net-zero transition was the focus of this month’s First Nations Clean Energy Symposium. 


Held in Adelaide, the event brought together First Nations’ leaders, government decision-makers, investors and industry trailblazers who are implementing solutions for the clean energy future.


The federal government’s Capacity Investment Scheme – an AUD 70 billion investment in renewable energy generation and capacity over four years – was a topic of discussion at the event, where it was announced the scheme would preference tenders with positive First Nations involvement. 


Projects will be assessed against two Indigenous-focused criteria: the quality and productivity of engagement with First Nations; and if projects can provide First Nations with the opportunity to increase social and economic benefits, such as ownership, revenue sharing, partnering, employment, and funding for sub-contracting of Indigenous businesses. 


Why does it matter?

The Capacity Investment Scheme represents a key policy mechanism to bring the country close to its target of 82 per cent renewables by 2030. 


Its first auction of dispatchable capacity sought 600 MW (2,400 MWh) of battery storage in Victoria and South Australia, but 19,000 MW of capacity was bid into the first stage of the auction process. A further 6 GW of wind and solar capacity will be launched later this month, and will be the biggest renewable tender in Australia to date. 


Modelling from Net Zero Australia shows that 43 per cent of all clean energy infrastructure required to reach the country’s net-zero emissions target by 2060 would need to be located on Indigenous lands. It’s vital for First Nations’ interests to be integral to renewables projects and that the projects deliver benefits to the communities and their proponents.


Many remote Indigenous communities are vulnerable to the impacts of the changing climate. Energy Minister Chris Bowen is expected to release a draft First Nations Clean Energy Strategy in the coming weeks for consultation. The AUD 5.5 million strategy aims to support First Nations aspirations to participate in and benefit from the clean energy transformation, and to ensure access to reliable clean energy for all Australians.



Old energy assets gain new life

Energy giant AGL has formed a partnership with solar startup SunDrive to explore the redevelopment of the decommissioned Liddell coal-fired power station into a solar manufacturing hub. SunDrive has patented technology that replaces silver with copper to reduce the cost and improve the efficiency of solar panels.


Transformation of the site, located in the NSW Upper Hunter region, will benefit from funding from the federal government’s AUD 1 billion Solar SunShot program, which is designed to boost Australia’s solar photovoltaic manufacturing capabilities through production subsidies and grants.


AGL closed its Liddell site in April last year after almost 52 years in operation.  


The Solar SunShot program will be delivered through renewable energy agency ARENA and marks a significant expansion of the AUD 830 million that the agency has already invested in 233 solar panel projects.


Why does it matter?

Despite Australia leading the world in the deployment of rooftop solar – one in three households has solar panels – only 1 per cent of solar panels are manufactured locally. 


Australian scientists were pioneers in advancing photovoltaic technology and the Solar SunShot program aims to increase the country’s role in the global solar manufacturing supply chain. Boosting domestic manufacturing will also save on importation costs, which currently account for approximately 15 per cent of total solar panel costs. 


The partnership between AGL and SunDrive presents employment opportunities in communities impacted by the closure of coal-fired power plants. It’s also an example of the potential for the energy industry to repurpose legacy assets to help propel the clean energy future.


Sites such as AGL’s Torrens Island in South Australia and ENGIE’s former Hazelwood mine and power station in Victoria are already being transformed into renewable energy precincts and low-carbon industrial hubs. You can read about how energy leaders are reimagining power stations in this article featured in Westpac IQ.



Tackling cattle's carbon challenge

Sustainability data from the supply chain of red meat producers is set to become more accessible with the launch of the Environmental Credentials platform by Meat & Livestock Australia (MLA). 


Unveiled at the Beef Australia event in Rockhampton this month, the platform was funded by the federal government’s Smart Farming Partnerships grant and developed by a consortium with WWF Australia and the University of Queensland.


Integrating satellite imagery technology, self-guided learning modules and self-assessment checklists, the platform provides a resource for red meat producers to compile their environmental sustainability data, learn and share their credentials throughout the supply chain.


MLA is also a partner in the multi-year Farming the Future program to conduct research on Australian farms to quantify the contribution of natural capital to their productivity, profitability and resilience. 


Why does it matter?

Cattle and the broader agribusiness sector are an important part of the Australian economy. Successful adaptation and prosperity for the Australian red meat and livestock industry relies on investments into the efficient and effective management of soil health, methane emissions, biodiversity and climate variability.


In 2017, MLA announced a target to be ‘carbon neutral’ by 2030, and innovation will play an important role. The Environmental Credentials platform is the latest development within MLA’s environmental sustainability research and development program, with investments aimed at improving the short and long-term sustainability of the natural environment, while also maintaining and supporting a productive red meat industry that meets community expectations. 


Innovation is key to improving efficiency and targeting ‘carbon neutrality’. An example of a feed supplement aimed at converting more energy to live weight gain instead of methane production is Bovaer, with two trials finding that it reduced cattle methane emissions by at least 50 per cent. The supplement is also playing a role in Coles’ strategy to reduce emissions throughout its supply chain, with three Coles Finest Carbon Neutral Beef retail suppliers using Bovaer.



State of play for sustainable finance in Asia Pacific

What factors are driving – and constraining – sustainable finance growth in Asia Pacific? This question is explored in a new report by Economist Impact, Financing for sustainability: Asia-Pacific’s ESG market opportunities, commissioned by Westpac. 


The report examines how tools such as taxonomies, frameworks and reporting standards are promoting the credibility of sustainable finance and notes that more nuanced approaches are moving sustainable finance into the mainstream. Read the report here.


Drilling into the future of critical minerals 

The long-term outlook for Australia’s critical minerals industry looks bright, despite the recent volatility in pricing, and the announcement of tax incentives in this year’s budget may provide a further boost. A new infographic on Westpac IQ digs into the indicators for growth, drivers of demand and causes of pricing instability. 


Critical minerals were also the theme of a recent Westpac-sponsored article in the Australian Financial Review, which looks at the extent to which pricing volatility will be driven by the retail cost of electric cars. It notes that when the entry level price of electric vehicles begins to compete with that of internal combustion engine cars, Australia’s future as a key supplier of these minerals will be secured. 


The article includes an interview with Joshua Thurlow, Chief Executive Lithium at diversified miner Mineral Resources, who states that Australia's solid regulatory environment and skills base will serve the industry over the long term. 


Andrew Strongman, Westpac Institutional Bank’s Head of Mining & Metals, notes that government support via policies is critical to providing the market conditions essential to develop and grow the transition minerals opportunity.

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