The Intersection of Innovation & Sustainability
Wendy Mackay, Program Director - Digital Sustainable Finance, Digital Finance CRC
Climate change, nature loss and financial systems
Even if emissions are cut today, the next decade of warming has been baked in.
Australia is experiencing much more intense and frequent weather cycles, droughts, storms and fires - each event costs millions of dollars and loss of life.
World Economic Forum 2024 risk report states that 4 of the top 5 global economic risks over next decade are related to nature and climate.
The solution is to reduce 72% of greenhouse gases with today’s technologies through renewables, electrification and sustainable gas.
But the world also needs to upgrade regulatory and financial systems to facilitate these changes.
Finance companies don’t have large carbon footprint but what they finance matters. Customers, regulators and stakeholders care about what you finance.
Why we should we care?
The world is undergoing the biggest and fasted economic transformation since the industrial revolution due to technology and climate change.
There are winners and losers
How do businesses create a sustainable and competitive advantage?
Over the last few years, hundreds of green fintechs have emerged in transactions, banking lending, risk and reporting. They’ve attracted hundreds of millions of dollars of funding.
With opportunity comes risk
Businesses need to incorporate climate and nature loss in risk models -refer to APRA CPG 229 climate change financial risks.
Two types of risks (upstream and downstream):
o Transaction risk – how consumer preferences, tech and regulation changes are affecting a business.
o Physical risk – risks to business assets in terms of more frequence and severe weather events.
Legal considerations
Fiduciary duty – consider, identify and manage all material risks. Refer to AICD’s Climate Governance Initiative Australia
Mandatory climate reporting starts next month with a phased threshold approach. Business will need audited sustainability report that is included in financial reporting.
Businesses shouldn’t underestimate the amount of work it takes to produce these reports.
Greenwashing is a form of misleading and deceptive conduct which is being pursued by ASIC. Businesses should be careful about the claims they make.