MEDIA: Toitū Tahua – Centre for Sustainable Finance: The first 180 days

Written by Ross Pennington, who was the Co-Chair of the Sustainable Finance Forum for Kanga News here.

This time last year was a time of transition for the New Zealand Sustainable Finance Forum. Perhaps most significantly, it launched its Roadmap for Action and formed a transition group – “SFF 2.0” – to move from the words of the roadmap to the actions it called for. The forum’s co-chair, Ross Pennington, updates on development.

he key priority highlighted in our previous update was the establishment and funding of an independent Centre for Sustainable Finance, to drive coordination across the financial ecosystem and accelerate the roadmap’s ambitious agenda. Toitū Tahua – Centre for Sustainable Finance was launched on 29 July 2021.

The decision was made that the centre should be an independent organisation, operating through collaboration among market participants and stakeholders. All funding for the centre’s establishment and operation had to be drawn from voluntary contributions from philanthropists and market participants. Although many hands were required to achieve this, special acknowledgement must be given to the determined efforts of Vicki Watson, chief executive of the Aotearoa Circle, the originator of the initiative.

This time also saw the appointment of the centre’s CEO, Jo Kelly. Jo has delivered cross-continent sustainability collaborations between some of the world’s best known business and civil society leaders. Her vision for the centre reflects her relationship with the B Corp movement and its core principles: interdependence, decentralised leadership, ambitious standards and whole-of-system change.

Acceleration remains a key theme. As Kelly puts it: “Stakeholders expect ambition – we have a responsibility to deliver on this.”

ASSEMBLING THE PIECES

Transformation requires a collective commitment that draws on the capabilities of a broad range of participants and stakeholders in the financial ecosystem, encompassing the private sector, central and local government, iwi/Maori, NGOs and academia. This has been a feature of the New Zealand Sustainable Finance Forum from its inception and is a key pillar of Toitū Tahua.

The leadership group, chaired by Bridget Coates, brings together 12 leaders with a broad skills matrix spanning impact philanthropy, iwi/Maori, governance and finance. In addition to setting direction for the centre, members of this group are responsible for coordinating a work programme being undertaken by more than 100 voluntary collaborators, representing diverse interests in the financial system.

The broad representation recognises that for change to be meaningful it must be systemic. This carries the need to move beyond old dichotomies such as public and private, by engaging all the financial system’s participants and stakeholders as “challenge owners”.

The shared challenge, and the centre’s purpose, is to accelerate progress toward a sustainable, equitable and inclusive financial system by 2030. The starting point of transformation is to articulate the challenge of owners’ intent and frame their mission.

This phase is designed to establish directionality, to scope needs, visions and objectives for systemic change, and to elicit explicit agreement to work together on a systemic intervention programme.

In the case of Toitū Tahua, this has a strong underpinning in the roadmap. It sets out three key objectives to drive the sustainability transition: changing mindsets, transforming the financial system and financing the transition.

The roadmap recommendations are divided into three waves over a 1-5 year period, representing the objectives and key sustainability themes supporting them. Articulating the priorities and forming them into tangible deliverables has been a key function first of the forum and now the centre.

Through the formation of implementation groups, comprised of market participants and reflecting key roadmap recommendations, the centre quickly established its work programme. Crucially, this process also established an active network of more than 80 trusted contributors tasked with driving projects forward and providing feedback to the central team.

While the centre acknowledges that sometimes collaboration takes longer than going it alone, this approach receives continuous validation in the centre’s interactions with public, private and philanthropic stakeholders.

PRIORITIES FOR 2022

There are three key 2022 priorities for Toitū Tahua to drive forward the agenda. The first is sustainable investment classifications, where there is a 2022 target of instituting a working group, governance and principles to deliver locally designed and implemented – but globally-aligned – taxonomies.

A focus on director and public sector leadership incorporates a series of initiatives aimed at exponential increase in climate competence and governance readiness. Milestones for 2022 include taking three cohorts of public and private sector leaders through a four-part workshop series and the launch of a sustainability fundamentals certificate programme for directors, finance professionals and employees.

Inclusion efforts will focus on access to essential services for people in vulnerable circumstances with a 2022 milestone of establishing initial governance and partnership for a collaboration through which humans can access essential services in one place.

These priorities represent only a sample of the extensive work programmes underway to accelerate the sustainability transition and give effect to the roadmap. Others include development of a stewardship code, investors’ impact management guidance, recommendations on mobilising transition finance and formation of the Aotearoa New Zealand Net Zero Investor Coalition.

Another key role for the centre is to act as an honest broker and clearinghouse for new ideas and collaborations. To increase profile, understanding and capability, the centre has an ongoing programme of seminars and media engagement, and commissions and brings together reports on current issues in sustainability.

THE TAXONOMY PROJECT

As a centralising classification system that does not readily slot into the remit of a single organisation or entity, the taxonomy project is an example of the originating rationale for an independent, cross-sectoral centre.

To support the sustainability transition, it is vital to have a sound framework to direct and guide investment. Taxonomies delineate what objectively counts as green in the context of the transition, and how these activities are measured. Sound taxonomies combined with quality data and reporting operate as a North Star, a critical enabler of sustainable finance and a truth serum.

Yet, despite their importance, they are not well understood. Taxonomies are at more advanced stages of development in a number of markets, including the EU and ASEAN. It is important that we benefit from this work, particularly given the inherently global nature of the sustainability movement and our position as a small exporting nation.

Equally, the range of simultaneous initiatives being undertaken internationally has resulted in some complexity and inconsistencies. It is important to recognise that taxonomies are rule sets reflecting their own legal and institutional frameworks, particularly evident in the code-based approaches taken in continental jurisdictions, that differ in their formulation and expression from the more principles-based ethos associated with development of the common law.

Producing taxonomies adapted to local legal frameworks, conditions and institutions is vital because the framework can only be given life to the extent it results in tools that can be implemented on the ground. Another important by-product of formulating local standards is to provide impetus for local conversations.

In particular, the local sustainability movement is informed by core matapono (values), including kaitiakitanga (responsibility for care and stewardship) and a shared commitment to follow through (tikanga).

MOBILISING CAPITAL

A key input in the drive to finance transition is to understand clearly from market participants and stakeholders what their sustainability aspirations and initiatives are, and the key roadblocks they see to their fulfilment.

To gain a current understanding, KPMG – in collaboration with Toitū Tahua – will be conducting a market research project, gauging the systemic blocks encountered by market participants in mobilising sustainable finance. This will form the basis of a report and recommendations due to be delivered in the second quarter of this year. It will have a key role in informing future directions and workstreams for the centre and in the development of informed policy and regulation.

This engagement will coincide with two key landmarks that will also bring attention to the sustainability Kaupapa. The first is New Zealand’s first emissions reduction plan (ERP), following a consultation that attracted an unprecedented level of public engagement.
The second is the External Review Board (XRB)’s consultation document on the strategy, and metrics and targets sections of New Zealand’s climate-related disclosure standards, following from its earlier consultation document on governance and risk management. XRB plans to issue its first standards by the end of 2022).

Toitū Tahua’s first 180 days have made its key role in highlighting the settings, innovations and investments that will enable the sustainability transition evident. A challenge for the centre is that its work is both technical – identifying barriers and solutions – and human, in the sense of responding to changes and creating the conditions for others to demonstrate leadership.

This makes collaboration a key priority. While the centre acknowledges that sometimes collaboration takes longer than going it alone, this approach receives continuous validation in the centre’s interactions with public, private and philanthropic stakeholders.

Significantly, it has resulted in Toitū Tahua being perceived as a trusted convener – an attribute its chief executive regards as core to its value proposition and ability to drive change.

Kelly sums up the mood: “We have massive tailwinds – we can shift focus from creating the case for change to harnessing and leveraging the momentum.”