More Certainty And Transparency For Clean Energy Investors

10 November 2021

This opinion piece was first published in The Australian Financial Review

An underappreciated development from the Glasgow climate conference was the steps taken by our independent financial regulators towards providing more guidance on climate-related risks to our financial system and our economy.

JIM CHALMERS MP
SHADOW TREASURER
MEMBER FOR RANKIN

 

MORE CERTAINTY AND TRANSPARENCY FOR CLEAN ENERGY INVESTORS

 

An underappreciated development from the Glasgow climate conference was the steps taken by our independent financial regulators towards providing more guidance on climate-related risks to our financial system and our economy.

This is a really welcome and important move towards unlocking more investment, jobs and opportunities from cleaner and cheaper energy.

Investors have been leading the way in ensuring there is greater transparency and accountability about these risks, but there’s only so much that they can do when the existing reporting framework is insufficient, inconsistent, and inadequate.

Labor understands these frustrations and we want to see clearer guidance from regulators and government about what companies should be reporting.

Like the Reserve Bank and APRA, we’d like to see disclosures that are more usable, credible and comparable.

This would set a baseline, all around the world, that we can measure ourselves against and will help investors make informed decisions.

We know climate change poses a risk to the entire financial system, and countries like New Zealand and the United Kingdom have already embraced comprehensive reporting systems.

More and more companies are committing to net-zero emissions and have established targets and plans to get them there.

Employers and regulators are leading the way where Scott Morrison, Barnaby Joyce and Josh Frydenberg have not, and cannot, because of internal political divisions in the Coalition parties.

Labor will take responsibility and provide leadership here where it has been missing.

But a lack of consistent and transparent information is only part of the story.

The Liberals’ and Nationals’ 22 ‘policies’ in 8 years have created serious and damaging uncertainty for investors.

Then when investors desperately needed a plan, in the lead-up to Glasgow, all they got from the Prime Minister was a pamphlet.

The headline in the Financial Review said it all: “’Whack-weary’ CEOs lament paralysing effect of Morrison carbon plan”.

Policy uncertainty pushes up the price of finance. That pushes up the price of new projects and technology, stifles innovation, puts upward pressure on energy costs, and means investors are increasingly needing to look offshore.

We know the market is there for renewable energy investments in Australia, we see it all around the world.  

But we’ve been bucking the global trend – losing another race we should be winning.

What our nation desperately needs is political leadership, policy stability, and clear and ambitious targets and policies, which create certainty for investors to follow.

Economic modelling for the Investor Group on Climate Change suggests Australia would create $63 billion in fresh investment opportunities over the next five years by strengthening climate targets and policies in line with reaching net-zero emissions by mid-century.

And stronger 2030 policies can unlock $131 billion investment in clean industries and new jobs by the end of the decade.

In a recent survey, 70 per cent of Australian investors, managing more than a trillion dollars in total, highlighted policy uncertainty as a key barrier to investment, up from 40 per cent last year.

This is a devastating vote of no confidence in Scott Morrison and Josh Frydenberg and the wasted decade of missed opportunities the Coalition has presided over.

As the Business Council of Australia modelling has demonstrated, taking meaningful action on cleaner and cheaper energy will not cost jobs and economic activity – it will create jobs and opportunities right around Australia, and especially in the regions.

Super funds recognise this and are investing in the transition to a more sustainable, low-carbon global economy – but nowhere near as much as they’d like to, and nowhere near enough here at home.

With Australia’s superannuation assets set to grow from $3.3 trillion today to around $34 trillion by 2060, super should be central to the recovery.

But that won’t happen without political leadership and the policies these investors themselves are telling us they need to help support more jobs and opportunities in more parts of the country.

Just last month the RBA warned that international investors are increasingly adjusting their portfolios in response to climate risks and that Australia risks facing increasingly higher costs in relation to emissions-intensive activities.

So we have no more time to waste.

Sunlight isn’t only good for generating cleaner and cheaper energy.

Shining the light of transparency and creating more certainty for investors is also key to ensuring our economy is stronger and more productive after COVID than it was before.

Jim Chalmers is Labor’s federal Shadow Treasurer

This opinion piece was first published in The Australian Financial Review on Wednesday, 10 November 2021.