Using finance as a lever for decarbonisation:
Mindful Money submission on the Emissions Reduction Plan
Mindful Money is a charity that promotes enhanced financial flows for emissions reductions and enhanced resilience; and the inclusion of social, environmental and climate considerations into financial decision-making. Mindful Money provides transparency of financial information; educates and empowers financial users; contributes to higher standards for providers; and advocates for a supportive legal and policy framework.
Mindful Money strongly supports urgent action to reduce New Zealand’s emissions. We support recommendations made by civil society allies for a policy framework that will go faster and further in reducing our emissions. Mindful Money considers that finance is a major gap in the consultation on the ERP. Finance has been a major cause of the climate crisis, but with the right framework, can be an important part of the solution.
This submission therefore focuses on consultation question 26. What else should the Government prioritise in directing public and private finance into low-emissions investment and activity?
Finance and Investment
Ambition: Within 15 years, Aotearoa New Zealand will be one of the world leaders in integrating climate into financial decision-making and financing climate solutions. This will attract local and international capital to enable a faster transition to zero emissions domestically and contribute to regional and global initiatives.
Financing: The government will make climate change a central a focus of the Green Capital Growth Fund and the Callaghan Innovation Fund to stimulate early stage financing for climate innovation, and increase funding for Green Investment Finance to support scale-up financing.
Disclosure: The Climate Disclosure Bill will be extended to include large private companies (as well as listed companies). It will be amended to require all companies and funds with reporting obligations to also report on how they will contribute to reducing net emissions to zero by 2050, with assessment by an expert panel (as proposed by the UK government).
Transparency: The government will support greater transparency in measures for the climate impacts of KiwiSaver and investment funds.
Financing SMEs: A review of the liquidity requirements for KiwiSaver and retail investment funds will be undertaken, with the aim of encouraging more investment in SMEs and start-up companies that provide climate solutions.
Financial Supervision: The Reserve Bank will incorporate climate risks in its assessment of capital adequacy for banks, insurers and other financial institutions.
Longer term horizon: the government will develop legislation and a code of practice to end short-termism of financial markets, including limiting the incentives that are paid to employees of financial institutions based on short term returns.
Countering Greenwash: The government will develop standards and a taxonomy that regulates claims of ethical, green, responsible, ESG and sustainable investment, and provides confidence for investors.
Stewardship Code: Investment funds will be required to exercise sound governance for the companies in their portfolios, including full consideration of the climate change and emissions reductions.
Key Financial Levers
Infrastructure: All infrastructure proposals with public funding will be screened to ensure they are compatible with a zero carbon future. The government will give priority to infrastructure that enables the climate transition.
Procurement: Companies will be required to demonstrate how they will achieve net zero emissions by 2050 as a requirement for major government contracts.
Carbon Price: The government will move rapidly to a carbon price of $140 per tonne, with a view to reaching it earlier than recommended by the Climate Change Commission.
Industrial Allocations: The government will act as quickly as legally permitted to end the over-allocation of free units to industrial users and establish a new scheme that provides incentives for emissions reductions.
Payment for Biodiversity: In order to promote balanced land use with regard to native forests and biodiversity, the government will introduce a system of payments for biodiversity services, alongside payments for carbon sequestration.
Legal liability: The government will develop legislation that creates legal liability for Directors if they fail to exercise due diligence with regard to adverse climate impacts, using the model of the Health and Safety at Work Act.
Financial inclusion: The transition to net zero should ensure that programmes are undertaken in partnership with tangata whenua, and that all groups in society have an opportunity to participate on an equitable basis. This includes specific programmes to support and enable inclusion for those with low incomes and few assets, women, minorities, diverse ethnicities and vulnerable groups.
Barry Coates, CEO of Mindful Money
Mindful Money provides information on investments by all KiwiSaver and investment funds into fossil fuel production at www.mindfulmoney.nz and investment for climate action at https://mindfulmoney.nz/pages/21/invest-climate-action/