Australia’s major banks, insurers and superannuation funds are urging a radical rethink in how to steer the economy out of the coronavirus pandemic-induced economic crisis, calling for stimulus measures that are consistent with the United Nations sponsored Paris Agreement climate targets.
In its first public statement since the COVID-19 crisis hit, The Australian Sustainable Finance Initiative (ASFI), a joint venture of the big four banks, major insurers, super funds, asset managers and financial regulators, has argued that simply throwing money at old forms of infrastructure is no longer appropriate.
Instead an innovative approach was needed that accepted the science of climate change and made sure any infrastructure or other stimulus spending would solve rather than contribute to the problem of global warming.
It urged governments and businesses to view the pandemic as a taste of the sort of shocks climate change will bring, and to take the opportunity to learn from it so they are prepared for the next shock.
“Global voices from business, civil society and finance have begun calling for a recovery that responds to two critical crises: the social and economic upheaval of this global COVID-19 pandemic as well as the rapidly accelerating impacts of climate change,” ASFI co-chairs Simon O’Connor and Jacki Johnson said in a statement.
They referred to a report by Oxford University, published last week, which surveyed more than 200 global central bankers, G20 finance ministries and academics from across 53 countries.
“The report concludes that recovery packages should ensure alignment to Paris Agreement commitments and set the pathway to achieving net zero emissions by 2050.
“When assessed, the most economically effective policy levers open to governments responding to the economic crisis are also those addressing the climate representing dual benefits for our economy, dealing with both short- and long-term challenges.”
The statement follows a report by the Grattan Institute last week which called on Australia’s conservative Liberal-National federal government to underwrite “green steel” production using hydrogen made from renewably generated electricity, rather than metallurgical coal.
It argued this new steel industry could help replace jobs in coal mining regions as coal production wound down.
In the ASFI statement Mr O’Connor said climate-aligned stimulus measures should not be limited to obvious green projects such as the steel project.
It could also include energy-efficient social housing construction and mass transit public transport projects, instead of traditional road-building and fossil fuel intensive programs such as the fertiliser plant in the Narrabri being proposed by the National COVID-19 Co-ordination Commission.
He also said investment was needed in electricity transmission to carry renewably generated electricity.
“There’s a whole list of things that are quite shovel ready,” he said.
ASFI was launched last year with the initial goal of designing a “road map” laying out how the financial sector should prepare for a low-carbon economy, including methods to channel more investment into environmentally friendly business ventures.
Its 18-person steering committee includes representatives of the big four banks, insurers QBE and IAG, asset manager Pendal and industry super fund Cbus.
The Australian Prudential Regulation Authority’s Geoff Summerhayes sits on the committee as an observer, as do two representatives of the Australian Securities and Investments Commission (ASIC).
The Paris Agreement states that in order keep global temperature rises below two degrees and as close to 1.5 degrees as possible, global greenhouse gas emissions must reach net zero by 2050.
On current trajectory, global temperatures are on track to increase by well above three degrees, and possibly more than four degrees, by the end of the century, a scenario scientists warn would lead to catastrophic climate change.
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