Australia has become something of a laughing stock on the world stage when it comes to real climate action – but now Federal Treasurer Josh Frydenberg wants to turn this around.
In a speech on Friday, Frydenberg acknowledged that the entire world was transitioning away from fossil fuels and towards renewable energy, and signalled Australia needed to do the same.
He noted that investment dollars were sending this message loud and clear.
“Markets are moving as governments, regulators, central banks and investors are preparing for a lower emissions future,” he said.
“Participants [are] making their own judgments as to what this new dynamic means for their existing portfolios and their future investment decisions.
“Trillions of dollars are being mobilised globally in support of the transition.”
The issue of climate change, and its ramifications, are here to stay, he added.
“It represents a structural and systemic shift in our financial system, which will only gain pace over time. For Australia, this presents risks we must manage and opportunities we must seize. That work is well underway, but there is still more to do.”
Why does Frydenberg’s speech matter?
Frydenberg’s speech is particularly notable because it breaks ranks from the party line touted by Australia’s Coalition Government, which has been known domestically and internationally for being resistant to taking bold steps to climate action.
Prime Minister Scott Morrison has said Australia has a “goal” to reach net zero emissions, “preferably by 2050”, but for how to get there. The rest of Australia’s states and territories have zipped ahead anyway and committed to that target for 2050 or earlier.
But even this target of net zero emissions by 2050 is “already becoming quite dated,” said the Australia Institute Climate and Energy Program Richie Merzian.
“It is no longer credible to only put forward a net zero by 2050 pathway,” he told Sky News yesterday.
“Everyone is starting to become impatient with Australia given it hasn’t updated its efforts over seven years now since it originally announced its target ahead of Paris and nothing more has been put on the table.”
With all that in mind, here are 5 key takeaways from Frydenberg speech in what is the biggest indicator that the Government is shifting its laggard stance on climate change.
1. Global investors are throwing money at climate action
Frydenberg noted that some of the biggest fund managers in the world, like massive US investment giants BlackRock, Vanguard and Fidelity, had themselves committed to the net zero emissions target.
More locally, Australia’s banks are also pouring more than $100 billion in climate-related finance.
“For them, there is an alignment between the commercial opportunities and the environmental outcomes,” Frydenberg said.
2. Australia’s at serious risk of losing access to this investor money
Australia’s Treasurer made clear his concerns about potentially losing access to funding as the rest of the world shifts to support a cleaner future.
With half of the Commonwealth’s Government bonds held by foreign investors, reduced access to capital markets would see Aussies face higher interest rates, home loans, business loans and funding for large infrastructure projects at risk.
“Australia has a lot at stake,” he said.
“We cannot run the risk that markets falsely assume we are not transitioning in line with the rest of the world.”
3. Frydenberg insists Australia is ‘making progress’
Australia’s regulators are aware of the need for financial institutions to disclose climate-related financial risks, Frydenberg said, and the Reserve Bank is also “factoring in” the impact of climate-related events on the economy.
Frydenberg also said Australia was an “active participant” in working with the G20 to develop climate disclosure frameworks.
“Just as Australia is making progress in strengthening our regulatory and financial frameworks, so too we are making progress in meeting our emissions reduction targets,” he added.
Since 2005, Australia’s economy has grown more than 40 per cent while reducing emissions by 20 per cent at the same time, Frydenberg said.
He added that $35 billion in renewable energy investments had been made since 2017.
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4. Miners and resources sector need help transitioning, too
In what is Frydenberg’s clearest signal of his commitment to net zero emissions, he said more investment was needed “all across the economy” to reach this goal.
“An economy-wide transition is needed,” he said. And this needs to be more than just “blacklisting dark brown [activities]”.
“The transition requires a broad based approach, which sees investment in emissions reduction strategies across all sectors, be it agriculture, mining, manufacturing, and others,” Frydenberg said.
Notably, he said these resources should be supported in the shift to lower emissions.
“It is wrong to assume that traditional sectors, like resources and agriculture, will face decline over the course of the transition. To the contrary, many businesses in these sectors are at the cutting-edge of innovation and technological change.”
He pointed to BHP and Fortescue as examples of mining giants that were investing in renewable technology.
5. Frydenberg’s message for businesses and banks
The Treasurer said he had a clear message for businesses: take advantage of the shift that is already underway.
“Opportunities will abound and it will be those businesses that recognise these trends and put plans in place to adapt that will have the most promising futures,” he said.
He also had a message aimed directly at Aussie banks, super funds, and insurers.
“If you support the objective of net zero, do not walk away from the very sectors of our economy that will need investment to successfully transition.”