The New Zealand Government has an ambitious economic growth agenda that aims to unlock New Zealand’s potential, grow the economy and ease the cost of living for New Zealanders.
The physical and transition impacts of climate change and environmental issues on society and financial institutions are real and some are already manifesting now. Some risks—especially systemic ones like climate disruption—cannot be diversified away or mitigated through stock selection.
Institutional directors, as fiduciaries, are legally bound to act in the best interests of their members and investors, which means recognising and responding to these emerging risks.
High quality foreign direct investment will only enter New Zealand when risks are appropriately managed, priced, or offset by returns.
There is nothing more likely to dissuade foreign capital from participating in New Zealand markets than the New Zealand government requiring that capital to invest in a way consistent with the government’s ideology.
That’s why we have made a submission on The Financial Markets (Conduct of Institutions) Amendment (Duty to Provide Financial Services) Amendment Bill, colloquially known as the “Woke Banking” Bill.
Key points from the CSF submission:
Financial institutions must have the freedom to assess, price and size their exposure to all risks, including systemic risks.
There is nothing more likely to dissuade foreign capital from participating in New Zealand markets than the New Zealand government requiring that capital to invest in a way consistent with the government’s ideology. This Bill undermines all the government activity to attract capital to New Zealand.
The Bill will add significant cost to financial institutions to validate what are clearly accepted lending and investment practices for no benefit.
The Bill conflates prudent risk management practices with ideological bias;
- to try to force banks to lend to businesses that pose long-term risks to our collective environment, and financial stability
- to undermine banks’ ability to manage reputational, regulatory, and transition risks prudently
- to put subsidiaries of Australian or other offshore owned banks or insurers in an untenable position through misalignment between risk appetite of their owners, their own credit/risk policies and ability to comply with the law
- to force insurers to ignore risks which fall under the labels attached in the Bill
The Bill is fundamentally misconceived and should not proceed in its current form.
Read our submission here.
RIAA has also made a submission recommending the Finance and Expenditure Committee rejects the Bill. Read their submission here.