ESG Impact: What you need to know - November/December 2024
Climate finance deals were high on the agenda at the global climate conference, COP29, held in November. Our final issue of Westpac IQ’s ESG Impact for the year explores some of the key outcomes from the two-week event, along with the latest on Australia’s increasing momentum in renewable energy, new policies and funding for road transport, plus the outcomes of two global nature and biodiversity summits, and more.
POLICY
Key outcomes from COP29
Finance was a key focus at global climate conference COP29, held in November in Baku, Azerbaijan.
Parties agreed on a New Collective Quantified Goal (NCQG) for climate finance to support developing countries. Building on the USD 100 billion target set in 2009, the NCQG has increased to at least USD 300 billion annually by 2035, and the agreement also calls on parties to work towards raising USD 1.3 trillion a year by 2035, from a wider range of sources.
Guidance was also established to operationalise Article 6 of the Paris Agreement, which sets out the principles for carbon markets. Countries have agreed on the standards required to enable country-to-country trading and a carbon crediting mechanism.
During the summit, Australia made a series of announcements primarily aimed at providing financial support to the Pacific, Southeast and South Asian regions. Australia also joined several initiatives to work with other countries to progress key climate priorities. All Paris Agreement signatories will be required to announce more ambitious emissions reductions targets by February 2025.
Next year’s COP will take place in Brazil. Meanwhile, Australia and Turkey remain rival bidders to host COP31 in 2026.
Why does it matter?
The impacts of climate change are not felt equally around the globe. Industrialised nations are the primary source of most human generated greenhouse gas emissions to date.
Under the United Nations Framework Convention of Climate Change (UNFCCC) industrialised nations agree to support climate change resilience activities in developing countries through the provision of financial support. As key elements of the Paris Agreement, NCQG and Article 6 are important vehicles for this.
While the NCQG calls on parties to work towards raising AUD 1.3 trillion a year by 2035, this falls short of the sum vulnerable nations say they need to climate-proof their economies. The UN Emissions Gap report, published in October this year, indicates that current NDCs put the world on track for a global temperature rise of 2.6 – 2.8C this century.
Much stronger ambition and action is required by nations in the next round of Nationally Determined Contributions (NDC), due in early 2025, or the Paris Agreement’s 1.5°C goal will be beyond reach, the report notes. With signatory nations required to announce more ambitious emissions reductions in a matter of months, we expect NDCs to be in sharp focus.
Green light for vehicle-to-grid charging
New policy and funding developments look set to drive change in road transport with Standards Australia approving a new standard to allow vehicle-to-grid charging in Australia.
Announcing the development at the Sydney International EV Auto Show in November, Federal Energy Minister Chris Bowen explained that the next step was for manufacturers and charging companies to register their vehicle-to-grid products with the Clean Energy Council.
This announcement follows news of a partnership between ARENA and the RACE for 2030 Cooperative Research Centre to publish a National Roadmap for bidirectional EV charging in early 2025.
During the auto show, the Minister also announced AUD 100 million is now available through ARENA’s Driving the Nation program to support heavy vehicle decarbonisation. Linfox and Toll are receiving AUD 19.6 million and AUD 9 million respectively from ARENA in addition to this funding. This will fund the deployment of battery electric trucks and infrastructure, highlighting ARENA’s commitment to decarbonise road transport.
Why does it matter?
Vehicle-to-grid bidirectional charging technology allows electric vehicle (EV) owners to draw power from the grid to charge their car and to supply electricity for other loads from the battery when it’s needed.
This has the potential to reduce energy costs for consumers and help to stabilise the grid by balancing supply/demand requirements during different times of the day. EV owners could benefit from cheaper electricity generated during the day and use their vehicles to power their home during peak times in the afternoon and at night.
Research from ARENA also shows that EV batteries could make up approximately 80 per cent of the gross storage capacity in the NEM by 2050.
As highlighted in previous editions of ESG Impact, Australia’s transport sector is set to become the biggest emitter by 2030. The government’s recent AUD 100 million funding announcement via ARENA is specifically designed to support research and decarbonisation efforts for heavy vehicles, which is recognised as one of the harder-to-abate sub-sectors.
Summits highlight value of biodiveristy
Nature was in the spotlight in October with two major events focusing on strategies for investing in, repairing and restoring the natural environment.
The world’s first Global Nature Positive Summit, was held in Sydney and attracted more than 100 global leaders and experts from approximately 50 countries. Agreement was reached on key issues, including that nature be factored into economic and business decisions and that indigenous leadership and perspectives are key to addressing environmental challenges.
Later in the month, the Conference of the Parties to the United Nations Convention on Biological Diversity (COP16) met in Cali, Colombia, for the first time since the adoption of the Kunming-Montreal Global Biodiversity Framework (GBF) in December 2022. Almost 120 countries, representing 61 per cent of the parties, submitted national biodiversity policy measures and actions to help meet the targets of the GBF.
Key outcomes of the event included the establishment of the Cali Fund, which addresses how industries benefiting from Digital Sequence Information (genomic data) should share those benefits with developing countries, indigenous peoples and local communities.
A subsidiary body to ensure indigenous voices are included in GBF negotiations was also established, and an additional USD 163 million was pledged to the Global Biodiversity Framework Fund, which finances high-impact projects in developing regions. This brings total funding to around USD 396 million.
Why does it matter?
Biodiversity loss is closely linked to climate change. In an example close to home, the preliminary results from the Australian Institute of Marine Science (AIMS) annual survey show some northern sections of the Great Barrier Reef have recorded their biggest annual decline in coral cover in the 39 years since AIMS began its monitoring program.
The Discussion paper on Nature transition plans, published in October 2024 by the Taskforce on Nature-related Financial Disclosures (TNFD) shows that achieving net-zero greenhouse gas emissions requires action to protect nature and enhance sinks, with nature absorbing 54 per cent of greenhouse gas emissions caused by human activity over the past two decades.
Developing nations are most vulnerable to the threat of biodiversity loss, and key commitments from COP 16 highlight positive momentum, with significant pledges to the Global Biodiversity Framework Fund.
The establishment of the Cali fund is also a positive outcome ensuring industries that profit from nature through Digital Sequence Information contribute more fairly and equitably to biodiversity conservation.
WESTPAC IN ACTION
Westpac releases 2024 Climate Report
Westpac's 2024 Climate Report outlines the group’s latest strategy, targets and plans for addressing the risks and opportunities presented by climate change, along with three priority areas for action as we work towards meeting our net-zero ambitions. It also describes our climate transition plan, detailing how we are working to reduce our carbon footprint and updating the annual data.
See the full report here.
New sustainable finance market update
This quarter’s Sustainable Finance Market Update from Westpac IQ covers trends in sustainable debt issuance globally and in the Australian-New Zealand markets.
Included are industry insights such as updates to the Green Star Performance for building sustainability and ASFI’s progress on the Australian Sustainable Finance Taxonomy.
You can access the update here.
Insights from the Women in Sustainable Finance event
The crucial role of nature in the ESG space was the focus of a recent Women in Sustainable Finance event, hosted by Westpac. A panel of corporate and industry sustainability experts discussed the link between climate and nature, strategies for incorporating nature into sustainability plans, and how businesses can contribute.
At this event, sustainability experts from Qantas, Blackmores, EY, S&P Global and Westpac emphasised the need to get moving on nature-based solutions and the synergies between reporting on environmental and nature goals for businesses.
Read about the event here.
Mandatory climate reporting swings into action
Mandatory climate reporting will kick off for large Australian corporations from 1 January 2025, and a new article in Westpac IQ outlines what to expect now and next. How are our clients facing into the new reporting era?
Learn more by reading the article here.
EnBW Energie Baden-Wurttemberg AG (Kangaroo Green Bond)
Westpac supported EnBW Energie Baden-Wurttemberg AG as a Joint Lead Manager in their recent inaugural Kangaroo green bond transaction. EnBW is an integrated utility based in the German state of Baden-Wurttemberg, with a business spanning energy generation, transmission, distribution, and retail, as well as a leading EV charging network. EnBW were able to raise A$1 billion across 5- and 10-year bonds to support their climate transition commitment to achieve carbon neutrality by 2035. As part of this commitment, the company will be significantly expanding its renewable energy generation portfolio, growing from 5.7GW in 2023 to 10-11.5GW in 2030, while all coal-fired power plants will be shut by 2028. Given the scale of transition underway, EnBW has significant capital expenditure requirements over the next decade and consequently a material draw on capital markets. Transacting in the Australian market provided the company with a cost-effective additional source of funding while diversifying its investor base, Australian superannuation funds and Asian institutions willing to support a European leader in renewable generation.
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