This article was published in The Australian Financial Review on 27 August 2025 in a slightly condensed form, omitting some of the quotes from IGCC members.
As the government approaches its final decision on Australia’s 2035 emissions reduction target, there is a powerful economic argument for hitting the top end of the 65-75% range the Climate Change Authority has called ambitious but achievable.
Current climate trajectories will have dire impacts on almost every part of Australian life, with commensurate financial impacts. The world’s central banks project $6.8 trillion would be wiped from our economy between now and 2050 if global warming continues, cutting thousands of dollars a year out of the pockets of Australians.
All superannuation funds have a fiduciary duty to deliver the best financial returns for their members, but every worker with a superannuation balance is exposed to economic damage from climate in Australia and around the world. Without a strong climate target and plans to achieve it, we’ll slide back into inaction, and we’ll all be worse off.
Super fund HESTA is already targeting 10% of its portfolio into climate solutions by 2030. It’s best if that keeps going beyond this decade. CEO, Debby Blakey, has said “we want to see the Federal Government set a strong and ambitious 2035 climate target, as this will help give investors the certainty they need to supercharge investment in Australia’s shift to a low-carbon future.”
It is true that strong targets, plans and action from Australia alone are not enough to entirely protect the economy, but they are part of what’s necessary, and they would deliver a host of additional economic benefits.
A target at the top end of the range, accompanied by credible net zero plans and action, would help accelerate the roll-out of renewable energy and storage; the cheapest form of new energy supply. That’s seriously needed with aging coal plants closing, and gas turbines being much more expensive to run. Some investors have found new gas turbines are unavailable for five plus years, whereas new solar, wind, and batteries can put downward pressure on power prices earlier.
Specifically, a strong target with credible sector plans would signal to businesses and investors that Australia is committed to growing the clean industries and projects that can create jobs and replace our coal and gas exports.
That’s crucial because relying on selling fossil fuels is a national risk for the medium and long term. Our key customers, including China and India, are highly vulnerable to climate change, including via food shortages, floods, and civil unrest. Although they buy fossil fuels from us today, they do recognise their own climate risks, so they’re building renewables at an astounding pace. Their climate risk exposure points to a rapid pivot away from coal and gas, and that could mean a crash in fossil fuels assets and income. A strong target, complemented by sector plans, supports an orderly unwinding of that national economic risk, and a well-planned transition for the people and communities who’ve relied on that income for decades.
Some of our countries’ biggest investors offer useful perspectives.
“We’d welcome support from across the Parliament to help accelerate a just transition to net zero” said Tyrone O’Neill, the Chief Strategy and Corporate Affairs Officer at Rest, which represents more than 2 million members nationwide – including around half who are aged under 30, “particularly through policies that enable the growth of new industries that reduce emissions, while creating meaningful and ongoing jobs and economic opportunities for local communities.”
Cbus’ Chief Investment Officer, Leigh Gavin, said “Ambitious climate targets and supporting policies can help address the economy-wide risks of climate change that may impact member returns. These policies can also incentivise investors to support Australia’s energy transition, as Cbus has recently done by taking an equity stake in one of Australia’s leading renewable energy generators, Atmos Renewables. We support a well-planned, fast and fair energy transition that addresses the needs of impacted workforces and communities.”
Australia’s leading ethical investment manager, Australian Ethical, recently wrote to the Prime Minister calling for the Government to be ambitious when setting emissions reduction targets for 2035. It’s CEO John McMurdo wrote “Being ambitious will enable the orderly transition of our economy, sending a clear signal to the market which will stimulate investment in emerging industries, jobs, and reduce the risk of stranded assets. Ambition also means avoiding regression. A national target that falls short – or a weakening of environmental protections – risks undermining the progress already underway and slowing momentum”.
Indeed, a confident, strong target would signal to our global partners and trade partners that we mean business, and stand ready to form partnerships – or strengthen existing ones – to deliver clean energy and industrial exports, building global demand for Australian goods.
The good news is that Australia has started to take advantage of our renewable energy potential, our critical mineral resources, and our skilled and innovative workforce – the economy is already moving. In the main electricity market, the proportion of renewables-generation has jumped from 34% to 43% in just three years. New clean businesses are starting, and Australian Treasury modelling shows there could be 213,000 clean energy jobs over the next eight years.
In the next few weeks, the government will make a good faith decision on our 2035 emissions target. A strong, confident call is the best chance to unlock billions of dollars from local and global investors. Those will flow into cheaper, cleaner energy sooner, and grow sustainable, forward-looking businesses that create jobs and wealth now and into the future.