ANZ wants urgent action on climate change, starting with its big customers
The countrys biggest bank, ANZ, says it would eventually cut off business customers who do not take a serious approach to the risks of climate change as a last resort. In October, New Zealand became the first country to pass a law making financial organisations disclose, and act, on climate-related risk . The new law covers about 200 large banks, credit unions and building societies, investment schemes such as KiwiSaver, licensed insurers, and listed companies. Dean Spicer, head of sustainable finance at ANZ New Zealand , said during a webinar organised by the CFA Society on the new climate-related disclosure regime that there needed to be a similar urgent response to climate risk as there was to Covid . READ MORE: * Sinking coastlines mean parts of Christchurch will feel impact of sea-level rise earlier than expected * Familiar reforms part of new Government plan to adapt to a hotter world * Scientists and most governments say fossil fuels must plummet by 2050. National's new adviser disagrees ANZ had been engaging with its largest customers, particularly higher emitters, for a number of years, wanting to understand what changes they would make to their businesses in response to climate change risks. But there was a clear link between access to capital, and the ability of a borrower to show they were actually making progress in capturing climate risk within their business strategy, Spicer said on Wednesday. Our preference is to support customers in that transition, he said. If we didnt get engagement or a willingness to transition, then there will come a point where we would need to exit that relationship. I think we would see that as a last resort, and sometimes we get asked why were financing a certain sector, thats because our primary objective is just to support that transition. There needed to be a compliance approach to speed up the changes required, he said. I dont think financial markets or capital markets are actually pricing climate risk at this point in time, so I think there is a significant risk of stranded asset risk or of valuations of assets being impeded if this doesnt get addressed with some urgency. But transition plans and strategies also needed to be seen as something beyond just a compliance exercise, he said. Under the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act, annual disclosures from the 200-odd reporting entities will be required from next year, subject to climate standards from New Zealands independent accounting standard setter, the External Reporting Board (XRB ). Dr Amelia Sharman, XRB director of climate standards, said it had done a large amount of work with the organisations over the past 18 months. We are seeing a huge gearing up as entities and their advisers prepare for the regime, and we know that for some it will be a steep learning curve, but it will be a really important one. If an entity was out of step with its peers, that would be noticed, Sharman said. Private capital was vital to keeping global warming limited to 1.5C . I love that line you often hear that there is enough money, there is enough capital out there to deal with climate change, its just about redirecting it and making the incentives there. And sometimes thats a carrot, and sometimes its a stick to make sure its investing in the right way. Vocal investors had a key part to play, particularly in combating issues such as greenwashing . It takes informed investors who understand what theyre reading and putting pressure on the entities to report well, Sharman said. Organisations needed to recognise the big opportunities presented to them in adapting to climate change, as well as the challenges. Craig Styris, executive director of Pioneer Capital, said the investment firm was currently tracking data from businesses it had a stake in. It would then begin to work with management teams and boards to start putting in place actual goals for businesses. The biggest challenge was what to measure and how to measure it, and in an efficient way. We want to understand the culture of the business because we know these changes are coming, so part of it is just assessing how receptive is the company and the management team to the changes that are coming, Styris said. Unsurprisingly there are some organisations that are a bit more resistant and there are others that are a bit more embracing of it. Any company that was hoping to attract international investment needed to have clear environmental, social and governance (ESG) reporting in place. Having the house in order as relates to ESG is absolutely table stakes today for dealing with international investors, and tomorrow its going to be more so, he told the webinar audience on Wednesday. The Government noted in its Draft National Adaptation Plan , released last week , that in 2021, fewer than 10% of firms had assessed their risks of climate change on their business, and fewer than 20% wanted to actually take actions to reduce those risks over the next five years.