17/10/23

GREEN FINANCE: Australia passes sustainable finance test for first time

As published on: investmentmagazine.com.au, Tuesday 24 October, 2023.

The Australian Sustainable Finance Institute (ASFI) has given the nation’s ESG practices a score above 50 per cent for the first time.

The annual ASFI tracker gave Australia an average score of 2.6 out of five across four domains of assessment, up 0.6 from last year.

The domain that saw the greatest improvement was one that assessed sustainability’s integration into the practice of financial system participants, including across institutions themselves, their supply chains and capital investments.

This signals substantial action in areas such as exploring a sustainable finance taxonomy, joining the International Platform on Sustainable Finance and global policymaking conversations, as well as developing TCFD-aligned reporting practices. Many of these actions are government-driven.

Addressing the crowd at ASFI’s Australian Sustainable Finance Summit on Tuesday, Minister for Financial Services Stephen Jones celebrated the progress that’s been made.

“Sustainable finance is here as a political and an economic issue, and it’s not going away,” he said in a pre-recorded speech. “Everyone can be confident that you’ve finally got a government that believes in sustainable finance.”

He reiterated the government’s commitment to sustainable finance with three continuing focus areas: the Australian sustainable taxonomy co-developed with the industry, greenwashing and sustainable finance-related surveillance, and a sovereign green bond issuance program to raise capital for public projects driving Australia’s net zero goal.

Jones stressed that the finance industry must treat these actions as collaborative exercises. “In coming weeks, we’ll be releasing a consultation platform [and] sustainable finance strategy. We have a big agenda, and we can’t do it alone.”

Road to financial inclusion and resilience
A domain that’s received a more “modest” rating in this year’s tracker was one that assessed Australia’s financial resilience, inclusion and capabilities, especially for vulnerable individuals and communities.

The domain received a segment score of 1.8 out of five, while five out of the nine criteria only received a score of one, suggesting that “negligible progress” has been made on these fronts.

These underdeveloped areas include community finance, income and revenue contingent loans, Financial Inclusion Action Plans, and industry-government collaborations on designing support programs.

Adam Davids, managing director of First Nations Equity Partners, a company that helps corporate Australia drive change and reconciliation with First Nations communities, was on a separate panel at the Australian Sustainable Finance Summit. He said there’s not a lack of appetite in the private finance sector to be better a contributor for reconciliation, but better directions in things that matter.

“For example, I’ve never seen a single ASX 200 company produce an audit on First Nations’ pay equity.

“With that in mind, we just don’t know if our Indigenous workers are being paid equitably, and what role can investors apply through their stewardship efforts to support companies in making our society more equitable.”

He added that there has never been more attention on Indigenous issues in the sector, but there’s more work to be done.

“We’re starting to see Indigenous Australians ask themselves questions like: What is the super fund of choice for Indigenous Australians? What is the bank of choice among Indigenous Australians?

“These trends continue to pick up momentum, but we do have to place greater conviction on the ‘S’ in ‘ESG’, which often does get lost.”

Tags

Green finance Sustainable finance ESG Australia