MEDIA: Global investors put climate heat on NZ business
Written by Greg Hurell, originally published on www.businessdesk.co.nz
No one, certainly not the minister of finance, should be surprised that global investors are taking a hard look at the climate impact of New Zealand's economic activity, a sustainable forum heard last week. Both finance minister Grant Robertson and climate change minister James Shaw attended a one-day State of Sustainable Finance discussion hosted by Toitū Tahua: Centre for Sustainable Finance in Wellington last week.
Toitū Tahua chair Bridget Coates said finance was at the heart of the transition to a low-carbon economy. "We know that the vast majority of our capital in this country comes from offshore. And we know that, increasingly, global capital is not indifferent to where these funds are being spent and invested.”
Earlier in the day, Robertson spoke of his recent visit to the United States, where he led a business delegation to New York and attended World Bank and International Monetary Fund meetings in Washington, DC. “The really interesting feedback we got was that, at every stage, be it access to capital or simple retail deals, every single conversation we had with business people in the US was centred around how you could describe your climate impact,” he said. That reaction tallied with conversations he had earlier in the year in Europe.
The largest supermarket chain in the United Kingdom wanted to know the emissions and emissions abatement throughout the food production chain, Robertson said. Addressing climate emissions mattered because it was central to New Zealand’s economic proposition over the coming decades. “Unless we are in a position as a country to be able to talk about that with great confidence, we run the risk that many of our exporters are going to struggle.” Wrapping up the session, Coates said Robertson seemed almost surprised at the reception he got in New York, but gave him credit for moving in the right direction. She had been in several conversations with Fonterra about its global consumers, who were absolutely emphatic about what the company needed to do. “And if it’s not going to happen, then that’s fine. They’ll find other services.” Supply chain ignorance From Jan 1 next year, most large financial organisations and listed companies will have to comply with climate-reporting standards.
Robertson said there were still massive gaps in climate-related data across the board which were often out of the control of the business community. When NZ imposed an autonomous sanctions regime on Russia, many companies had no idea if a Russian bank or financier was in their supply chain. “The same thing applies on climate. Do you really know who’s made the widget that goes into the product that you're now selling? That’s the message I was getting overseas – you need to know, just as you need to know whether it was financed by a Russian oligarch, as well.”
Shaw said consultation on whether to introduce new climate-reporting standards revealed that nearly 90% of the business community agreed with the plan. “It was an interesting cabinet meeting, because it’s not often that we get 89% of the private sector saying, ‘Yes please, we would like to be regulated in the following ways.'” An asset replacement programme Shaw said making the transition was mainly a finance question, because most of the technology needed to make the transition already existed. But businesses needed to carry out a massive asset replacement programme to decarbonise. “If we haven’t got a business model to replace the high-carbon widget with the low-carbon widget, to electrify everything that currently runs on fossil fuels, then we’re just not going to get there, and a lot of that is to do with depreciation,” he said.
Caroline Lambert, head of trade for the EU delegation to NZ, talked of the bloc's ambitious emissions targets and said it wanted to ensure green goods and services flowed freely across international borders. An audience member asked Lambert whether NZ dairy farmers were "doomed" if they wanted to continue exporting to the EU during the transition. Lambert disagreed and said NZ was ahead of other countries in looking at how to price agricultural emissions. "There are some strong challenges, compared with fossil fuels. You don't have the technology yet to be deployed at scale to decrease emissions from livestock, in particular." But she was confident that solutions for agricultural emissions would emerge within the next decade.
Alarming rise Climate Change Commission chair Rod Carr said the world was in an unprecedented and accelerating rate of global warming and was on track for an average temperature rise of 3°C. "Why is that so alarming? It is alarming because in the last 300 million years, there is no evidence the average temperature on the surface of this planet has been more than two degrees above our pre-industrial level."
Carr said there were 29 weather disasters worldwide, causing more than US$1 billion ($1.7b) of damage in the first nine months of this year. It was no surprise that global finance was beginning to assess climate-change risk, including insurance cover and access to credit.
Global finance would be proactive in financing the transition, because it was in the interests of global finance to behave that way, he said. “The challenge for New Zealand is to make sure that we are ahead of the curve, that we have the tools to access the technologies to deploy at scale pace to reduce our emissions."