Media releases

Leading Australian financial institutions and finance industry peak bodies have made a joint statement on the Australian Government’s proposed Safeguard Mechanism reforms. As well as finance industry peak bodies ACSI, ASFI, IGCC and RIAA, the joint statement has been signed directly by institutional investors including Aware, Cbus, HESTA, First Sentier, IFM, Metrics, and Ethical Partners. These organisations represent more than 500 investors, banks, insurance firms and financial service providers who collectively hold over USD$29 trillion assets under management. The statement welcomes the Government’s proposal to reform the Safeguard Mechanism, while noting that the emissions reductions required under the Safeguard Mechanism are not yet aligned with the reductions needed to limit global warming to 1.5°. Leading Australian financial institutions and finance industry peak bodies have made a joint statement on the Australian Government’s proposed Safeguard Mechanism reforms. As well as finance industry peak bodies ACSI, ASFI, IGCC and RIAA, the joint statement has been signed directly by institutional investors including Aware, Cbus, HESTA, First Sentier, IFM, Metrics, and Ethical Partners. These organisations represent more than 500 investors, banks, insurance firms and financial service providers who collectively hold over USD$29 trillion assets under management. The statement welcomes the Government’s proposal to reform the Safeguard Mechanism, while noting that the emissions reductions required under the Safeguard Mechanism are not yet aligned with the reductions needed to limit global warming to 1.5°. Therefore, the Safeguard Mechanism should be a floor, not a ceiling, to facilities’ decarbonisation activities.

Incoming international reporting standards will provide a helpful blueprint for directors as they discharge their duties, with a new legal opinion confirming that Australian company directors should already be focussing on financially material issues such as climate risk and other sustainability matters. The opinion comes from one of Australia’s leading legal experts on financial climate risks, Sebastian Hartford-Davis, and Kellie Dyon of counsel. It builds on the landmark ‘Hutley Opinions’ by Mr Hartford-Davis and Noel Hutley SC, which confirmed that directors have a duty to consider and manage climate risk. MinterEllison acted as instructing solicitors on both the Hutley Opinions and the current brief. The International Sustainability Standards Board (ISSB) draft standards, set to be finalised later this year, would require disclosure of material information about sustainability risks. The legal advice, sought by a group on institutional investors – the Australian Council of Superannuation Investors (ACSI), Investor Group of Climate Change (IGCC) and the Responsible Investment Association Australasia (RIAA) – highlights that directors should not face increased liability risks under ISSB standards and should not need any kind of ‘safe harbour’.

Demonstrating our collective willingness to work together to enable the finance sector to make a larger contribution to the climate, environment and social objectives of Australia, the organisations listed below issue this Joint Statement on Accelerating Sustainable Finance. As leading Australian financial services firms, we recognise our critical role in shaping Australia’s future. Our activities – which include finance and investment, insurance, investor stewardship, client relationships and advice, stakeholder engagement, and policy engagement – can provide significant support for the transition to a net zero, climate resilient Australian economy, the regeneration of Australia’s natural capital, and a more prosperous and fair society. We recognise the important role of strong partnerships between government, the private sector, and other stakeholders in achieving these goals. Private finance and investment alongside government funding is essential to accelerate progress, as is a supportive policy and regulatory environment. Demonstrating our collective willingness to work together to enable the finance sector to make a larger contribution to the climate, environment and social objectives of Australia, the organisations listed below issue this Joint Statement on Accelerating Sustainable Finance. As leading Australian financial services firms, we recognise our critical role in shaping Australia’s future. Our activities – which include finance and investment, insurance, investor stewardship, client relationships and advice, stakeholder engagement, and policy engagement – can provide significant support for the transition to a net zero, climate resilient Australian economy, the regeneration of Australia’s natural capital, and a more prosperous and fair society. We recognise the important role of strong partnerships between government, the private sector, and other stakeholders in achieving these goals. Private finance and investment alongside government funding is essential to accelerate progress, as is a supportive policy and regulatory environment. We welcome the Treasurer’s announcements today of the Australian Government’s plans to drive sustainable finance in Australia.

The UN Principles for Responsible Investment, the Global Sustainable Investment Alliance and the CFA Institute have been working together over many years on joint programmes relating to ESG disclosure standards, definitions and understanding practices. They are acutely aware of the increasing pressure on their members and signatories to clearly present approaches to ESG investment so that beneficiaries, regulators and other stakeholders are able to understand ESG approaches taken in investment products and strategies. This public resource is intended to be used by the investment industry, regulators and policy makers with the objective of providing greater clarity and alignment in their usage in literature and across the industry.

The portion of New Zealand assets managed using a rigorous, leading approach to responsible investment reached 49% totalling $179 billion in 2021, up from 43% in 2020, a new study by the Responsible Investment Association Australasia (RIAA) found. The Responsible Investment Benchmark Report Aotearoa New Zealand 2022, researched in collaboration with EY, shows a step up in responsible investment activity. Investment managers are expanding their responsible investment offerings to investors across their portfolios, improving transparency and disclosures, ramping up their engagement with companies on sustainability issues, and increasingly excluding sectors deemed unethical. The study also shows excellence in responsible investment typically materialises into superior financial returns. In 2021, products certified by RIAA as quality, true-to-label responsible investments on average outperformed benchmarks across all categories and almost all timeframes, while non-certified products labelled responsible investments stayed on par with benchmarks.

The number of Australian assets managed using a rigorous, leading approach to responsible investment has hit a record value of $1.54 trillion, now accounting for 43% of the total market, according to a new study by the Responsible Investment Association Australasia (RIAA). In addition, a record 45% of investment managers are holding companies to account on matters relating to environmental and social issues, and reporting back to investors on the outcomes achieved. This number has more than doubled in the past two years, with only 21% of investment managers engaging in such activity in 2019. The findings come as part of the latest Responsible Investment Benchmark Report, researched in collaboration with EY. Responsible investment, also known as sustainable or ethical investment, is a broad-based approach to investing which factors in people, society and the environment, along with financial performance, when making and managing investments. Recent high profile action from shareholders with companies such as AGL shows investors have significant influence in shaping their future direction and strategies on issues such as climate change.This year’s report found that this approach – also known as corporate engagement – saw the greatest increase out of any responsible investment strategy in 2021. Approximately $726 billion in assets under management is now being used by fund managers to agitate for change on ESG issues, up 54% from 2020. The study also shows excellence in responsible investment materialises into substantial financial returns.Products certified under RIAA’s Responsible Investment Certification Program on average outperformed the market in the medium to long term, and over some time frames achieved two or three times the returns. This outperformance is seen both when comparing RIAA certified funds to the overall market, as well as to products of investment managers who self-declare as practising responsible investment.

Twenty of Australia’s most influential business and finance peak bodies have come to an unprecedented consensus on the need for sustainability reporting including action on climate risk through a new reporting regime that aims to set a global baseline. The group has welcomed the International Sustainability Standards Board (ISSB) draft sustainability standards in a joint submission which collectively represents the voice of 20 peak professional, industry and investor bodies in Australia who came together to prepare the joint response to the two exposure drafts. The peak bodies together represent more than 400 companies, approximately 300 investors with US$33 trillion assets under management, and 500,000 business and finance professionals. The group considers clear, transparent, comprehensive and comparable disclosure of sustainability-related information to be part of the foundation of a well-functioning global financial system. The group supports a global approach to the development of sustainability disclosure standards and for the ISSB to be the global body to issue these standards. Twenty of Australia’s most influential business and finance peak bodies have come to an unprecedented consensus on the need for sustainability reporting including action on climate risk through a new reporting regime that aims to set a global baseline. The group has welcomed the International Sustainability Standards Board (ISSB) draft sustainability standards in a joint submission which collectively represents the voice of 20 peak professional, industry and investor bodies in Australia who came together to prepare the joint response to the two exposure drafts. The peak bodies together represent more than 400 companies, approximately 300 investors with US$33 trillion assets under management, and 500,000 business and finance professionals. The group considers clear, transparent, comprehensive and comparable disclosure of sustainability-related information to be part of the foundation of a well-functioning global financial system. The group supports a global approach to the development of sustainability disclosure standards and for the ISSB to be the global body to issue these standards. The overarching goal should be a globally consistent, comparable, reliable, and verifiable corporate reporting system to provide all stakeholders with a clear and accurate picture of an organisation’s ability to create sustainable value over time

A wide cross-section of business, investor and conservation groups have come together to support the passage of the Climate Change Bill as an important step towards the greater climate policy certainty needed to support investment in the transition to a low-carbon economy. The lack of a settled national policy has consistently been cited as a key inhibitor to the effective management of climate change risk by investors, directors and other business leaders. There is bipartisan and broad community and business support for achieving net zero emissions by 2050. The Government legislating a 2030 target of at least a 43 percent emissions reduction under the Paris Agreement establishes some much-needed policy certainty. Importantly the legislation includes a process for advice and adoption of deeper targets over time. It also provides clarity to investors and the business community more broadly, given all nations have committed under the Paris Agreement to only strengthen their stated contributions. The group considers legislating a national 2030 emissions reduction target to be a timely signal to the market of the Government’s ambition, and further encouragement to Australian organisations to progress their own decarbonisation plans. Australian organisations need to remain internationally competitive to support our nation’s high living standards.

Today’s dire State of the Environment report should raise alarm bells to the Australian business and finance sectors, as the nation moves into further debt to nature, with deteriorating indicators across most measures. The health of Australia’s natural environment is becoming a material financial risk and proxy for the state of our economy, given the significant interdependencies between the two: from agricultural industries to resources, from tourism to property, right through to financing and insurance. The 2021 State of the Environment report shows the past five years have seen an alarming rise in threatened species, land clearing, extreme weather events, and destruction of Indigenous heritage, and that environmental decline is damaging human health and wellbeing. “For too long, nature has been relegated and seen as something out there beyond our cities, a place we visit only on holidays, or space that is preserved in our national parks,” said Estelle Parker, Executive Manager of Programs at the Responsible Investment Association Australasia (RIAA).

The Responsible Investment Association Australasia (RIAA) has welcomed ASIC’s greenwashing guidance, saying that it will help investment managers to raise the overall quality of sustainable finance products in Australia and to better meet consumer expectations. ASIC’s new greenwashing information sheet provides clarification on the existing obligations and laws investors should comply with to avoid greenwashing, including what disclosures they should be making and how to avoid making misleading claims. “Greenwashing poses a real threat to the future of sustainable finance. Our 2021 research shows that while the majority (89%) of the Australian investment market claims to be responsible, it is just 40% of managers that are engaged in leading practice responsible investing” said RIAA CEO Simon O’Connor. “We welcome the focus on greenwashing by ASIC which reinforces that, by law, any investor making a sustainability claim must be able to substantiate this and provide supporting evidence. This guidance will be essential reading for investors and product issuers to understand how greenwashing is defined, the existing regulations they need to comply with and the questions to consider when marketing sustainability related products, such as if the product is true to label.”