• Trustees Corporate Supervision

Jun 30, 2021

Leading the Fight against Climate Change – The role of Sustainable Finance

Sustainable finance offers solutions for climate goals

The long term economic risk of not fighting climate change is extreme, but long-term risks aren’t inherently a concern for traditional short-term investments. This means that most actors in the financial system have been incentivised to disregard the climate impacts of their short term investments. The result of this was decades of investment activity that not only failed to address climate change, but accelerated the problem.

New Zealand’s push for sustainable finance is also, then, a call for companies to consider the long term impacts of their short term endeavors.

New Zealand’s disclosure bill is set to realign investor perspectives

Starting in 2023, New Zealand’s largest companies will be required to disclose the impacts of their business on climate change and how they plan to navigate climate-related risks. By requiring major banks, insurers, and investment funds to do this, the government wouldn’t just be directly putting pressure on large institutions, but also seeking to empower small investors through transparency.

Providing information on climate risks specifically offers an increasingly critical data point. Investors who understand the direct impact of an investment – beyond the simple monetary return it generates – will be able to make better choices about how to invest. This will be essential in achieving New Zealand’s goal of achieving a carbon-neutral public sector by 2025 and a carbon-neutral private sector by 2050. While this latter milestone doesn’t seem imminent, it requires the private sector to begin taking action on climate issues now.

Seizing global leadership on climate

Transforming our economy into a system that protects the environment rather than exploiting it is a massive undertaking. It requires time, effort, and incredible investment that simply can’t be brought to bear without the sustained, long-term support of the financial sector.

Recognising this, the government, along with organisations like the SFF, are educating investors about the value and necessity of sustainable finance, then working with them to bring about the change we need to create the future the next generation deserves.

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