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: firstname.lastname@example.org
The world's largest economies risk missing the window of opportunity to maximise the global recovery from the pandemic and accelerate the energy transition, says Dileimy Orozco from think tank E3G
Many believe the ECB and other central banks should bring climate considerations into the rulebook governing what they support and how
European Union climate policies need to become more ambitious as the bloc looks to hit its net-zero emissions goal for 2050. But a gap between what is agreed on paper and deployed in the real world means a risk of having to do more than one energy transition. Lawmakers are setting up an EU-wide advisory board to bridge that void
The world’s development banks are funnelling ever-greater volumes of finance into clean energy — but the challenge of shifting entire economies away from climate-wrecking activity and towards actions that align investment goals with those of the Paris Agreement requires a more holistic approach
Coal power generation is the single biggest cause of global temperature increase. The efforts to transition away from coal must accelerate to avoid the catastrophic effects of climate change, say UK energy minister Kwasi Kwarteng and Canada’s climate change minister Jonathan Wilkinson, co-chairs of the Powering Past Coal Alliance
The Green Bank Network has committed almost $15 billion of predominantly public capital to mobilise a total of $50 billion towards the low-carbon transition