Big four funding climate initiative

The Big Four banks are all putting their money into a new initiative to focus on sustainability in financial services.

Australian Sustainable Finance Initiative co-chair Jacki Johnson revealed the unanimous backing as she unveiled plans to draw up a roadmap to tackle climate change at a lecture in Canberra.

The growing consensus by corporate Australia around a need for action was echoed by CitiHead of Australian ESG Zoe Whitton who was speaking on a panel in Sydney at the same time.

While they agree on the need for action, they do not agree on whether it will include the government.

Johnson said: “The need to realign Australia’s finance sector to support greater social, environmental and economic outcomes for the country is now essential and urgent.

“For Australia to continue to prosper in the 21st century we need to realign the systems that underpin our economy to support human well-being, social equity and our environment.

“The financial system is one such system that requires realignment with this purpose.

“Importantly, a sustainable finance roadmap is not a set of asks of government, but rather it will set out a plan for the finance sector, looking at a full suite of levers to achieve these objectives.”

She revealed ASFI had received funding from ANZ, Australian Ethical Investments, Bank Australia, Commonwealth Bank of Australia, CBUS, Insurance Australia Group, National Australia Bank, QBE and Westpac as they “recognise the importance of a sustainable finance sector”.

Whitton said risks where the physical climate change impacts were causing unplanned disruptions to businesses or assets are happening far earlier than anticipated.

And she added the financial system is beginning to govern itself towards a response to this rapid evolving environment.

She told the panel: “We’re getting to a point where we are starting to think that these risks are a little bit more immediate than we previously anticipated, or at least the markets previously anticipated.

“We often think of financial markets as attempting to hack their way out of their existing analytical technology.

“Australian corporates are governing themselves as if there was a shadow carbon price. They're governing themselves as if there was a 45 per cent target.

“But that is not sustainable which is why we need a policy setting. Otherwise we will get a disrupted transition if we don't have policy settings. 

“The markets probably capable of transitioning itself but will do so in a kind of messy way.”

ASFI co-chair Simon O’Connor - who is also on the Responsible Investment Association Australasia - said consumers expected their money to go into sustainable funds. 

But he insisted those funds were performing better.

He said: “There is a growing understanding that strengthening relationships and trust with customers and employees and addressing environmental, social and corporate governance issues are all critical to manage to ensure stronger economic and financial outcomes.

“Those companies managing climate change risk, and other ESG risks are demonstrating a stronger financial performance, making better investments, and are presenting lower risks.”

A RIAA report released earlier this year revealed almost half the $2.24trillion managed by professional investors is in a climate aware portfolio.

That compares to just 17 per cent of the total in 2013, when responsible investments accounted for $178 billion.

Research by RIAA highlighted 92% of Australians expect that their superannuation or other investments to be invested responsibly and ethically.