Investor Sentiment Rallies on Australia’s Climate Policies

25 March 2024
New Data from Firms Managing $37 Trillion

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Investor sentiment on Australia’s climate policy has significantly improved since 2021, according to new data released today from Australia’s most credible and comprehensive survey of institutional investors’ climate investment practice.

The yearly survey by the Investor Group on Climate Change covers the vast majority of Australia’s institutional capital market.

This year’s data includes 63 superannuation funds, other asset owners and asset managers with more than A$37 trillion AUM globally. Their beneficiaries include more than 15 million Australians.

Super funds and investment managers have a legal duty to act in the best financial interest of their members and have assessed that a fair and fast transition to net zero delivers the best long-term returns. This is not possible without stable, economy-wide and investible policy.

Investors are also increasingly seeing the economic and asset level costs of escalating climate damages. Climate volatility means economic volatility, higher insurance bills, and less profitable companies. Recovery costs mean less money to spend on productive industries such as health and education.

Headwinds Easing on Climate Investment

Investors were asked to nominate barriers to climate solutions investment in Australia.

  • In 2021, approximately 70% investors cited policy and regulatory uncertainty as a barrier. In the late 2023 data, released today, that has dropped to just 40%.

Investors’ Top Priorities for Government

Investors were also asked to nominate the relevant policies that want government to prioritise. Their top responses were:

  • 1.5°C sector-by-sector decarbonisation plans (56 percent);
  • Policies that can be addressed by these decarbonisation plans
    • improved carbon pricing through the Safeguard Mechanism (54%),
    • funding support for new technology (53%), and
    • phasing out fossil fuel subsidies (51%)
    • a 1.5°C aligned national 2035 target

Investors’ emerging policy priorities include:

  • The development of mandatory climate-related disclosures. This is gaining increased focus due to the implementation of legislated requirements in Australia and around the world over the next 12 months (annual increase 20+ points)
  • the Government establishing clear timelines for the phase out of coal, oil and gas (annual increase 20+ points), and
  • clear policies to build resilience and adapt to the physical damages of climate change ( annual increase 20+ points).

Where Investors See Climate Solutions Opportunities

Investors were asked which energy and climate solutions they saw as delivering the best long-term returns for their millions of beneficiaries. The top five responses were:

  • Renewable Energy (47%)
  • Nature solutions, (including biodiversity or nature capital (34%)
  • Energy Storage (32%)
  • Low Carbon Transport (32%)
  • Industry/materials (including critical minerals) (32%)

Nuclear energy came equal last out of the 14 possible responses, along with sustainable oceans.

Erwin Jackson, Managing Director, Policy said: “Investors have given the government a pretty good report card. They’re also sending the message that credible, investible and durable policy frameworks put in place today will support strong investor and beneficiary returns into the future, enhance Australia’s economic competitiveness, and help attract international capital.”

“Credible and clear sector by sector decarbonisation plans to achieve a 2035 target with the highest possible level of ambition are critical for investment and it is critical to build on the steps already taken.

“We must have a fair and fast transition to net zero emissions, but we must also adapt. Investors look forward to working with governments on initiatives that can incentivise and remove barriers for private sector investment in adaptation across the economy.”

“Through a fair and well-planned transition and climate adaptation, governments can support investment and provide a better life for all Australians: cleaner, greener and healthier communities, and more money to live comfortably.”

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