Growing stability in policy and political consensus on climate change is critical for investors’ confidence to deploy capital towards climate solutions, as indicated by new survey data released by The Investor Group on Climate Change (IGCC).
Based on the data, IGCC says that credible long-term market signals, as well as stronger political consensus, are required to reverse the historic trend of turbulent climate policymaking in Australia and avoid capital flight.
The Investor Group on Climate Change recently surveyed institutional investors covering around 60% of the total assets under management (AUM) in Australia.
Three of the most policy-relevant findings are:
- Policy certainty is improving off a low base: Last year around 70% percent of investors highlighted policy uncertainty as a key barrier to investment in Australia, compared to 56% this year.
- Other major barriers to capital deployment include:
- a lack of appropriate investment opportunities (58%),
- the lack of clear definitions of what constitutes a climate solution (33%). Policy solutions will be required to address these barriers and support investment.
- The next three priorities for further climate policy reform:
- setting 1.5oC aligned sector pathways and plans (46%),
- an improved approach to carbon pricing (e.g. Safeguard Mechanism reforms) (44%),
- setting 1.5oC aligned national emissions targets (40%).
Based on discussion with investors and analysis after the survey period, factors that have contributed to increased investor confidence include:
- a stronger 2030 emissions target and passage of Australian Climate Change Act,
- bipartisan support for net zero emissions by 2050, and,
- the acceleration of other climate policy reforms at a sector level and state level.
Download: Recent climate policy improves investment environment – Policy brief, December 2022
IGCC Policy Director Erwin Jackson Said:
“Recent changes in climate policy are giving investors more confidence to invest billions of dollars of capital to accelerate Australia’s transition to a net zero economy.”
“Stronger 2030 emissions targets and bipartisan support for net zero emissions by 2050 are welcome. But they’re not enough on their own. Investors are seeking sector-by-sector emissions targets and detailed plans as a crucial next step.
“The Government and Parliament must strengthen the Safeguard Mechanism to ensure Australian industries remain competitive in a net zero world.”
“Australia is in a global race to attract capital to ensure our continued economic prosperity as we steer towards a net zero world. Implementing stable long-term policy and forging political consensus on climate policy reforms will ensure Australia is an attractive destination for capital investment.”
About this data
During September 2022, IGCC surveyed institutional investors (superannuation funds, sovereign wealth funds and asset managers) regarding net zero aligned investing. Responses came from 53 institutional investors with funds representing more than A$30 trillion AUM globally and A$2.1 trillion AUM within Australia. The findings therefore represent the views of approximately 60% of total AUM in Australia.
This brief covers the results of the survey as they relate to Australia’s policy environment.
The full, more detailed report on how investors are responding to climate change risks and opportunities will be released in early 2023.