ESG Impact: What you need to know – February 2025
Here’s the latest round-up of the standout ESG developments making the headlines, from industry highlights to policy updates. Why does it matter? What does it mean for you?
Tax incentives were on the agenda this month with tax incentives for green hydrogen and critical minerals passing the Senate. Westpac IQ’s ESG Impact also explores the investment mandate from the NSW government’s green bank, plus more funding for green iron, the deployment of innovative floating solar projects, and more.
POLICY
Tax incentives for green hydrogen and critical minerals
Producers of green hydrogen and critical minerals look set to benefit from amendments to the Future Made in Australia Bill 2024, with two tax incentives passing the senate earlier this month.
Under the scheme, hydrogen producers will be offered an AUD 2 per kilogram produced incentive during 2027-2040 in the form of a tax offset. A refundable tax offset of 10 per cent of eligible processing costs will also be offered to subsidise the costs of processing and refining critical minerals, such as lithium and nickel, over the same period.
Why does it matter?
The green hydrogen tax incentive aims to support Australia’s efforts to decarbonise its industries, and the critical minerals production tax incentive aims to encourage investment in Australia’s critical minerals processing sector.
The incentives will be provided once projects that produce hydrogen or process critical minerals - used in products like wind turbines, solar panels and electric vehicles - are up and running.
Also passing both the House of Representatives and the Senate this month was the Electricity Infrastructure Legislation Amendment Bill 2025. This Bill legislates the continuation of the Capacity Investment Scheme (CIS) and the targets of at least 23 gigawatts of renewable energy generation capacity, and at least 9 gigawatts of clean dispatchable capacity, by 2030.
The CIS encourages new investment in renewable energy generation and clean dispatchable capacity by underwriting successful projects, setting a revenue ‘floor’ and ‘ceiling’. The scheme aims to support a reliable, affordable and low-emissions energy system, to help deliver the Australian Government’s 82% renewable electricity by 2030 target.
NSW Green Bank unveils investment mandate
The NSW government’s green bank – the Energy Security Corporation – has announced its first investment mandate. Announced by Energy Minister Penny Sharpe, the mandate outlines how the Corporation will co-invest with the private sector in renewable energy projects for the state.
Key priorities for investment include short-to-long-duration storage projects that capture excess renewable energy to maximise use of electricity generated from solar and wind. Investments will also cover projects to upgrade infrastructure to ensure the smooth operation of the grid, and to coordinate consumer energy resources in households, businesses and the community, such as virtual power plants.
Why does it matter?
Established in June last year, the NSW Energy Security Corporation is seeded with AUD 1 billion to help fill investment gaps in the transition from coal to renewable-dominated grids. This will support New South Wales in achieving its targets to reduce net greenhouse gas emissions.
The announcement of its investment mandate represents a key milestone for the state’s green bank, which is modelled on the Federal Government’s Clean Energy Finance Corporation. The state’s four remaining black coal generators are expected to close within a decade and NSW will need to build its renewables capacity to meet energy needs.
The Energy Security Corporation, which will soon appoint its inaugural board, will co-invest with the private sector on energy storage projects, such as large-scale batteries, community batteries, pumped hydro and virtual power plants, to help build a more reliable energy system.
Funding boost for green iron
Australia’s green iron manufacturing sector received a funding boost this month with the announcement of the Federal Government’s AUD 1 billion Green Iron Fund. Aimed at supporting early mover green iron projects and unlocking private investment at scale, it builds on the AUD 2 billion Aluminium Production Tax Credit, which aims to decarbonise the energy demand of the nation’s aluminium smelters.
Why does it matter?
Investment in green iron and steel will help to secure future demand for Australia’s iron ore as the world transitions to lower emissions iron and steel.
Australia is the world’s largest producer of iron ore. In 2023-24, it generated more than AUD 100 billion in export income and its wider iron and steel sectors support more than 100,000 direct and indirect jobs.
Iron and steel production is responsible for 8 per cent of global emissions. The Green Iron Fund, designed in consultation with the Green Metals Expert Panel, aims to support global emissions reduction while boosting local green iron manufacturing and supply chains.
INNOVATION
Power systems turn aquatic
One of the latest renewable technologies that looks set for deployment in Australia is a floating power system that can increase renewable energy generation capacity while conserving water.
The deployment of floating solar projects across Australia is the result of a partnership between Singaporean renewable microgrid developer Canopy Power and Norwegian PV innovator Ocean Sun.
The collaboration centres on Ocean Sun’s patented circular floating solar system, which is built on a circular membrane-based floater measuring 70-metres in diameter and only 1 millimetre thick. The floater’s solar panels provide up to 700kWp of solar PV capacity and its integrated pumps harvest millions of litres of rainwater each year.
The floaters can be scaled as required to provide the desired solar PV and rainwater harvesting capacity.
Why does it matter?
The global energy transition requires innovative solutions, and this technology helps to address the increasing demand for both renewable energy and sustainable water supplies.
The floating solar solution provides dual benefits for conserving water through the additional harvesting of rainwater, as well as a reduction in evaporation thanks to the membrane that covers the water’s surface. It is also wind and wave resistant due to its hydroelastic thin membrane. The technology may also enhance water quality by reducing algae blooming in the body of water.
Canopy Power and Ocean Sun state that the floating solar solution will benefit companies and communities that have access to bodies of water, including farms, energy producers, and hydrogen production facilities.
WESTPAC IN ACTION
Blue economy in focus
Marine activity contributes at least AUD 10 billion in value-add to the New Zealand economy and a new report from Westpac explores opportunities to increase this value while also navigating challenges.
It examines the potential of the ‘blue economy’, which refers to activities that use ocean resources while also incorporating elements of sustainability and the potential of the ocean to support humanity in the future. You can read the full report here.
Q4 2024 Sustainable Finance Market Update
In this quarter's Sustainable Finance Market Update, we cover trends in sustainable debt issuance globally and in the Australian-New Zealand markets, as well as industry insights such as updates to the Green Star Performance for building sustainability and ASFI's progress on the Australian Sustainable Finance Taxonomy.
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