James Shaw Opinion - 24/November/2022

The climate fight must also include the finance sector

Governments can play an important role in affecting the financial markets to support decarbonisation, says James Shaw, Minister of Climate Change for New Zealand

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy


Efforts to green the finance sector will help the energy transition

Asked why he robbed banks, American bank robber Willie Sutton said, “Because that’s where the money is.” He had a point.

People often ask me why, as Climate Minister, I am so focussed on financial services. The financial services sector itself is not a major source of emissions.

If you ask the average person where we need to focus to bring down emissions, most people would say agriculture, transport or energy. And they would be right—except of course that all of that work requires financing.

So the role and influence of the finance sector in the transition is, I think, often underestimated. And it has been a big focus of our recent climate action in Aotearoa New Zealand.

At its launch in 2019, the Green Investment Finance bank was capitalised with an initial NZ$400 million to galvanise private sector finance into the green economy. And it has already had some wins.

For instance, solarZero, one of the companies that Green Investment Finance has worked with, was recently sold to BlackRock, an asset management firm. Over the coming seven to ten years, BlackRock is going to put a billion dollars, above the sale price, into solarZero. That is a lot of solar panels.

Meanwhile, we barred default KiwiSaver funds from investing in fossil fuels. Given that around 75% of all New Zealanders stick with their default funds, that represents a pretty big divestment. Elsewhere, we put in place a Responsible Investment Framework for Government funds, which all now have net-zero strategies.

Around the same time, we announced the New Zealand Government’s framework for the upcoming Sovereign Green Bond issue.

While Green Bonds are not new debt, this does mean that the debt we are taking on will come with strings attached. It means an extra layer of accountability taking us towards net zero.



And, of course, we were the first country in the world to require all listed companies and large financial institutions to report on their climate-related risks from next year. Through the Sustainable Finance Roadmap and engagement with the wider business community, we have heard there is industry demand to improve and extend external reporting and disclosures.

But the regime is already having an impact, even before the first reports are due out. For example, I was recently talking to a bank that has started talking to its farming customers about how to lower their climate-related risks. That means building resilience to increasingly frequent and severe storms, floods and droughts.

But it also means working out how to cut the farm emissions that cause climate change in the first place. Shifting these capital flows will make a colossal difference in the years to come. We have made a lot of progress and I know there is a lot more to come.

As I write this piece, I am preparing to depart for COP27 in Egypt. There I will be emphasising the importance of sustainable finance and aligning capital flows with a low-carbon, climate-resilient future.

The transition to a zero-carbon economy is, in my view, a once-in-a-generation opportunity to build a future that is cleaner, more equitable, and much more prosperous. Everyone has a part to play in making it happen. •


If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com


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