- The Labor party has time and again highlighted its support for sustainable energy adoption.
- The banking sector needs to be resilient to a shift in climate change.
- The Australian Banking Association has extended its support to the global climate change movement.
The newly elected Australian Prime Minister Anthony Albanese has heralded his party’s climate-oriented agenda throughout his campaign. His focus on developing renewable energy in the country and enhancing the Australian grid with alternate forms of energy resonated with the Aussie population. However, Australia has many considerations before a switch to renewable energy can be adopted.
The climate change policy action has gained momentum across the globe as worrying reports about global warming made headlines recently. International organisations are increasingly paying attention to climate change and are pressing world leaders to make it a priority. Australia’s climate preservation measures have come under the scanner as they have been deemed inadequate compared to the measures adopted by other countries.
Nevertheless, Labor’s political win has brought forth a wave of change in Australia, cementing a more cautious approach to the country’s future endeavours. A faster renewable energy adoption is expected to open doors to many new opportunities that can reshape the climate change scenario in Australia. Banking groups and investors are eyeing new avenues that can arise out of Australia’s upcoming climate change framework.
Banking sector extending support
The Australian Banking Association has announced its support for the goals of the Paris Agreement. The organisation has extended its assistance in providing climate-related products and services. This includes developing a smoother transition to low carbon technologies and helping customers build climate resilience into their businesses or homes.
The industry has pledged AU$135 billion to finance sustainable initiatives by 2025. Banks across the country have also expressed interest in funding resource projects and have further acknowledged the fact that Australia’s emissions intensity is different from other regions like Europe.
Banks such as Westpac have also shown an interest in enabling a smooth transition and not watching from the sidelines. Thus, the overall banking industry is hopeful that Australia will assume a leadership role in the energy transition within the Asia-Pacific region.
Financing the energy transition via taxonomy
Perhaps the biggest financial framework to promote climate preservation is the development of an Australia-specific taxonomy. Under this framework, there would be clear definitions of what constitutes “green”, “sustainable”, and “transition” finance. Developing a local taxonomy would help enhance the financing of energy projects.
Australia’s sustainable financing is based on Europe’s taxonomy, which is very strict around transition finance and has no room for new oil and gas. This has heightened the need for a local framework. Essentially, Australia-specific taxonomy is expected to ensure that sufficient funds are flowing to maintain transition financing. Additionally, Australia might be able to exactly define which activities constitute environmentally friendly activities and which others fall outside this bracket.
As the newly elected governments bring forth the climate change agenda into the limelight, many believe that it would be an opportunity to fully tap the private sector’s financial proficiency. Though the private sector has individually made a move toward sustainability, the addition of government-mandated regulations could further strengthen the effort.
Banks need to be risk-proof against all financial changes arising out of changes in management and internal systems. They can adjust their business models and make necessary changes in management in order to better accommodate a shift to sustainable energy. In a way, a change is required not just on the policy front but also among prudential regulators and banking corporations.