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Investment grade sector decarbonisation plans can deliver capital in a global race for clean energy industries and jobs, the Investor Group on Climate Change said today as it releases major report on the investment industry’s needs from the Governments sector-by-sector climate plans.
The new discussion paper, “Decarbonisation investment solutions for sectors: A discussion paper on Sector Transition Plans and their importance to investors” is based on in depth consultation with institutional investors and seeks to support a broader discussion on how sector plans can deliver investment into just and orderly transition to net zero emissions.
Critical to investment grade sector plans are:
- Sector plans can play a crucial role in building a common understanding within Australia of what must be done. Decarbonisation needs to be a team effort. We all need to be clear about which parts of the economy will be doing what, and we need to be confident that every sector is doing its fair share. Different sectors will go at different speeds in the race to net zero emissions.
- Sector plans give Australia agency. The global transition is going to be disorderly. Having sector transition pathways will minimise disorder in Australia’s transition, and will allow Australia to take advantage of the global race to clean energy.
- Sector plans need to be aligned with the Paris Agreement objective of limiting climate damages above 1.5oC. Climate change creates huge financial risks and opportunities for Australia. The greatest of these risks is the climate loss and damage that would be caused by global warming above 1.5°C.
The report also outlines what sector plans are not and how companies and governments can use sector plans to attract capital to transition activities.
The Importance of Sector Pathways
Actionable pathways will drive economic growth and attract investment while seizing on the net zero transition opportunities.
Accordingly, investors have identified investable sector plans as their highest policy priority to attract capital to the transition in Australia. In July, Government made the welcome announcement that it will work with investors, industry, civil society, experts, unions and the community to develop “sector plans”, for six sectors; electricity and energy; industry; the built environment; agriculture and land; transport; and resources. The Parliament has also requested the Climate Change Authority provide advice on sector decarbonisation path by August 2024.
Actionable sector transition plans, which can underpin stable and long-term policies, will help investors avoid investing in potentially stranded assets, and allow them to allocate capital confidently.
As well as their value to investors, credible and actionable sector pathways will provide value to the economy overall. They can:
- Foster understanding for investors, governments, communities and companies of the role of different sectors in Australia’s decarbonisation.
- Assist companies in developing better individual transition plans and allocate capital to transition activities.
- Enable federal, state and local governments to align their policies to effectively support just decarbonisation efforts sector by sector.
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Quotes
CEO, IGCC, Rebecca Mikula-Wright:
“Investors strongly support the commitment of the Government to deliver investment grade sector plans through deep consultation across all stakeholders.”
“Investors want to take advantage of the global race to clean energy. Sector plans will be a key element of an investable response to the substantial clean energy subsidies in the USA, EU and similar nations like Canada. Subsidies are no substitute for long term policy plans and stability.”
“Investors will rely heavily on the sector pathways to make decisions about where and how they direct large amounts of capital to support Australia’s decarbonisation efforts,” says Mikula-Wright .
“Sector plans will be pivotal in establishing a shared understanding of the required actions within Australia. Credible sector plans will involve hard decisions. They will also show exciting investment opportunities. Investors are prepared to play their part and look forward to working with the Government, the Parliament and other stakeholders deliver investment grade climate policy in Australia.”
Chief Investment Officer, Cbus Super. Brett Chatfield:
“Cbus Super welcomes the Government’s commitment to, and consultation on, the development of sector pathways.
As a long-term investor we are keen to support the energy transition by investing in solutions and supporting companies as they transition to a low carbon future. Sector pathways will help us direct investment to support Australia’s long-term decarbonisation and enable us to better identify industries that are both key to Australia’s transition and important to our members.
Cbus members build and maintain Australia, and the energy transition will impact many of them and their communities. Sector pathways would underpin long term policy, contributing to improved planning across communities, government, business and investors. Ensuring local skills are developed to support the industries of the future will increase both the investment and employment opportunity these industries represent and help support a successful and smooth energy transition.”
Chief Executive Officer, First Sentier, Mark Steinberg:
“We welcome the opportunity to work with the Australian government to develop sector pathways and support IGCC’s advocacy in this area.
Each sector will face different challenges as we transition to a low-carbon economy, and it is important to have the right pathways in place.
This will not only attract investment to the economy so the benefits of a transition can be shared by all, but it will also support us, as an investor, to better understand sector-specific risks and opportunities in
our portfolios so we can preserve and enhance returns for our clients.”
Chief Executive Officer, IFM Investors, Dave Neal:
“Addressing the big systemic challenges facing economies and communities, such as climate change, requires collaboration across the investment community, the private sector and with governments.
That’s why we are supporting IGCC’s work and hope this report contributes to the development of credible and actionable plans that can accelerate Australia’s net zero transition, while supporting jobs and the broader economy.”