Government and business collaboration key for climate progress

Co-operation between government and business is vital given the nature of the challenges we face as a nation, principally climate change, require both policy certainty and billions in funding.

The challenges we face as a nation, principally climate change, require both policy certainty and billions in funding. Picture: Getty Images

Treasurer Jim Chalmers started the year calling for closer, collaborative relationships between government and the corporate sector in an essay in The Monthly.

The Treasurer’s Investor Roundtable is one way he’s putting that theory into practice. On Friday, the chief executives of Australia’s largest financial institutions showed once again that they’re up for it.

Traditionally business loathed government intervention, but now welcome the mechanism for collaborative discussions that are open and focused on solutions to key issues facing Australia.

That’s because the nature of the challenges we face as a nation, principally climate change, require both policy certainty and billions in funding.

That’s why the announcement of a green bond framework, as the first step in a sovereign green bond issuance, is welcomed by industry as an important signal of government’s willingness to support the growth of high-quality green capital markets in Australia. It will also sharpen the spotlight on Australia’s climate policy credentials.

More than 40 nations have issued sovereign green bonds. The international investor engagement to support the first issuance brings a level of scrutiny that we haven’t faced before (just ask New Zealand).

In line with developments in the corporate bond market, driven by European investors, investor questions are not only focused on the sustainability credentials of activities directly funded by the bond, but the overall climate credentials of the issuer, in this case the Australian government.

If the urgency of climate transition wasn’t enough, this announcement provides the impetus to move quickly on development of science-aligned sectoral decarbonisation pathways to support sound investment, policy decisions and smart blended finance that enable the development, commercialisation and rapid deployment of climate technology and a comprehensive and ambitious sustainable finance strategy for Australia.

Which is why the other standout announcement is the commitment of government to work with industry, through the Australian Sustainable Finance Institute, to develop an Australian Sustainable Finance Taxonomy.

Taxonomies provide the foundation of sustainable finance architecture in a growing number of countries. They provide common metrics for climate disclosures, including progress being made against climate transition plans, guard against greenwashing and help to drive allocation of capital towards more sustainable assets.

There is strong support from investors, banks, insurers, regulators and now government for the idea that Australia needs its own taxonomy to ensure our ability to attract capital for the transition. Government involvement will enable the taxonomy to slot into Australia’s sustainable finance architecture as it develops.

As has happened in other jurisdictions that have developed a taxonomy, the expertise, user perspective and execution capability of the private sector will accelerate the pace of development, ensuring alignment with the science and a strong focus on usability for both reporting and capital allocation.

While the taxonomy is an excellent place to start the government’s sustainable strategy, this is not the only reason it is a standout announcement. This work also establishes a new model for public-private collaboration.

This collaborative approach, with co-funding from government and industry, mutual respect and recognition of the skills, capabilities and perspectives that each brings, strong alignment on the overall objectives of this work, facilitated by an institute established specifically to bring the best of the public and private sectors together to make progress on sustainable finance is a standout example of how we can get a lot more done together.

For while Australia is not front of the pack on this agenda, by turbocharging this work there remains an opportunity for us to shape global rules and norms on transition finance.

Credible definitions of transition finance will be crucial for the international competitiveness of Australia’s key sectors like mining and agriculture, both of which will play key roles in the transition.

We’ve learnt a lot from our partners in the European Union, Canada, Britain, ASEAN and Singapore, and it will be by continuing to strengthen these international connections as we develop the taxonomy that Australia will regain our international reputation as a productive, collaborative and progressive contributor on climate.

That’s why conversations like those on Friday do matter – they accelerate progress and action.

Collaboration is new for many people – across the public and private sectors. And true collaboration requires a different way of working – sharing resources, knowledge and power, putting the partnership and the outcomes first beyond individual organisational objectives, investing time to get to truly know your partners and valuing the knowledge, skills and capabilities they bring.

For today, neither sector can achieve its objectives without the other. It is not only desirable, it’s essential for business and government to collaborate for commerce to thrive.

These conversations are valuable to demonstrate the highest level of organisational commitment to collaborative solutions and give organisations the mandate to reimagine how things are done, and really accelerate action.

Kristy Graham is the chief executive of the Australian Sustainable Finance Institute and was a special attendee at the Treasurer’s Investor Roundtable on Clean Energy on Friday in Brisbane.