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ASIC Commissioner calls for sustainability finance taskforce

ASIC Commissioner calls for sustainability finance taskforce

John Price, Head of the Australian Securities and Investments Commission (ASIC), called for a financial taskforce to be set up on climate change.

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By Nigel Frith 25.07.2018

John Price, Head of the Australian Securities and Investments Commission (ASIC), called for a financial taskforce to be set up on climate change as he spoke to business leaders in Sydney.

Price admitted that company directors may have to face public liability suits if they refuse to consider the implications of climate change in their business strategies. He called upon all Australian businesses to be as socially responsible as possible.

Highlighting the need to have a serious look at the current evaluation process for companies, Price said that the introduction of sustainable finance measures would be necessary.

At present, ASIC is holding discussions with the international community to figure out how it can assess and measure environmental and sustainability risks. The European Commission’s Action Plan on Financing Sustainable Growth is under consideration as a template on which to build something suitable for Australian businesses.

Research carried out by the UN’s Environment Inquiry has unearthed some 267 sustainable finance measures in place across 53 different jurisdictions, and Price has called on others to follow its lead.

The UN inquiry aims to look at the potential for “mobilizing capital towards a green and inclusive economy” and covers research in more than 20 different countries. The figures show clear progress, with regulatory measures doubling over a four-year period up to 2017.

Cited as one example, Britain has currently put two major strategies in place, including one for clean growth and one for industry. This is alongside measures to implement a 25-year Environment Plan and the initiation of a Green Finance Institute.

In tandem, the Bank of England has released a climate change paper and is assessing the potential requirements for “Greening the Financial System”, which will consider macroeconomic needs as well as helping banks look at their climate risks and offer advice where appropriate. 

Some of these measures already appear to be working, with the Clean Growth Strategy mandating a complete phase-out of coal use for energy supplies by 2025. This has already led to Britain managing an entire day without relying on any coal for fueling the National Grid, a feat last achieved over a century ago in 1882.

Europe looks to be more ambitious in its desire to drive all capital investments toward more sustainable measures and reduce the risk of long-term futures in potentially toxic assets, combining the European Commission’s Sustainable Finance Action Plan with the European High-Level Expert Panel on Sustainable Finance. These key markers are a clear way to reduce the risk of financial downturn caused by climate change.

On the back of this, the European Commission wants to taper expected responsibilities of directors and trustees by introducing new prudential and reporting expectations and mandating transparency about which products are actually “green” and “sustainable”. This will prevent companies from marketing their products with these terms unless they meet clear definitions.

Interventions from ASIC and APRA are helping steer Australia onto the right path, with a climate risk-focused working group being set up by the Council of Financial Regulators.

With all EU-based trade deals at present containing a chapter on sustainability, it would seem prudent for Australia to adopt sustainable finance measures to give the chances of a trade deal greater scope for success.

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