Sustainable investments in green finance need to increase “substantially” if Australia wants to meet its net-zero goals by 2050 and decarbonise its economy, a Reserve Bank of Australia (RBA) official said on 8 August.
Investment in clean energy alone needs to be at three times its current rate by 2030 in order for Australia to meet its targets, Carl Schwatz, acting head of domestic markets at RBA, said in a speech at the Risk Australia conference.
“While the investment needed to transition to a low-carbon energy system globally is huge, inaction on climate change will be far more costly in the long run,” he said.
Australia relies heavily on non-renewable energy, with coal being used to generate three-quarters of domestic energy. While the country has made some headwinds in developing renewable energies, it accounted for just 8% of energy consumption in 2021.
Although a modest share of the overall bond market, green bond investment has increased in recent years, Schwatz said. Green bond issuances in the first half of 2023 have already exceeded the A$10bn issued in 2022, as investors and issuers have become more interested in the sector.
The main uses of green bonds in Australia have been those around green transportation, energy efficiency and green construction projects. Interest in green loans has also increased, said Schwatz although data is difficult to come by.
“Given the importance of bank lending in the Australian financial system, green loans are an attractive prospect for assisting in the green transition,” he said.
Regulators and the government have taken a number of steps to help with the transition to net zero, Scwatz said. The Australian government plans to issue a sovereign green bond in 2024, while regulators are developing a taxonomy, working against greenwashing attempts, and helping institutions manage climate change risks. The government has also proposed mandating climate disclosures for companies and financial institutions.
The central bank itself is making efforts to develop its own understanding of climate change, as well as improving its environmental operations. It plans to release what climate-related disclosures it can, including its operational emissions.
“Improving data and transparency around climate risks and sustainability will support efforts in financial markets to align investment with climate goals for the net zero path ahead,” he said.
Australia received a D- in the Green Central Banking scorecard, largely due to its lack of monetary and financial policies around climate change.
This page was last updated August 11, 2023
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