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The Aotearoa Circle’s Sustainable Finance Forum (SFF) – comprising representatives from banks, insurance companies, industry, Māori businesses and iwi, professional services, civil society, academia, and Government – today released its roadmap for building a sustainable financial system by 2030.
The Circle’s Roadmap for Action covers three themes – changing mindsets, transforming the financial system and financing the transformation. Under these themes are 11 priority areas each with detailed recommendations.
“Our vision is for a financial system that is more resilient, inclusive, robust, and agile through
incorporation of environmental, social and economic considerations in financial decisions,” says SFF co-chair and NZ Super Fund CEO Matt Whineray.
The SFF’s kaupapa is to achieve a financial system that:
• provides for long-term environmental, social and economic prosperity;
• operates within environmental, human and social constraints and dependencies;
• moves from a focus on shareholders to a focus on all stakeholders (including our environment and society), and;
• preserves, enhances, and restores the planet for future generations.
“The current system has proven good at the creation of financial wealth but has largely done so with less consideration of sustaining the quality of our land, water, climate and communities. Changes are needed to embed environmental and social considerations into market mechanisms and fiscal incentives, so ultimately capital allocation decisions by actors within individual businesses are aligned with our shared goals for the planet and its people,” says Mr Whineray.
SFF co-chair Karen Silk, who is also Westpac GM Customer Experience Hub and Sustainable Business Council chair, says on strict economic measures New Zealand has become a more prosperous nation in recent years. “But this has come at a significant cost when considering broader measures of wellbeing, including environmental and social outcomes,” she says.
The report notes that the health of our planet, and all who rely on it for survival, is in peril. “We need to change the way financial decisions are made to ensure our current economic activity is not coming at the cost of the long term health of our environment,” says Ms Silk.
The 11 priority areas set out in the report include:
• Responsibility: Explicitly require financial system actors to consider, manage and account for environmental, social and governance risks and opportunities (ESG) and real-world impacts
• Capability: Raise capability in sustainable finance through education and training
• Governance: Improve public and private sector governance for sustainability
Transforming the financial system
- Data: Improve data and information quality and availability, including through the use of fintech
• Disclosure: Improve and extend external reporting and disclosures
• Co-ordination: Establish and fund an agile and independent Centre for
Sustainable Finance to oversee and coordinate implementation of the Roadmap
• Account and value: Integrate environmental, social and cultural outcomes into investment decisions to ensure we operate within planetary and societal boundaries
• Inclusiveness: Recognise that financial services and products are a utility and create an inclusive financial system
• Government leadership: Develop a Whole of Government sustainable finance strategy
Financing the transformation
- Resiliency: Improve prudential regulation over environmental risks
• Standards and pathways: Develop standards and pathways that encourage investments which deliver positive environmental, social and economic outcomes
The report is the result of 22 months of research and collaboration by a leadership group and technical working group of more than 50 people as well as two hui to incorporate Māori guidance and six focused on funds management, financial inclusion, corporates and public sector workshops. More than 200 stakeholders were engaged in the roadmap process, of whom 95 per cent said the current financial system is not sustainable or inclusive.
Ms Silk says sustainable finance is on the agenda of many comparable countries and regions. “Across the world’s largest 50 economies, there have been over 730 hard and soft law-policy revisions which support, encourage, or require investors to consider long-term value drivers such as environmental, societal and governance factors.
“Ninety six per cent of these economies have implemented policy to help investors consider sustainability risks, opportunities or outcomes. Europe, the United Kingdom, Canada and China are significantly more advanced in the transition towards a sustainable model than New Zealand.”
Mr Whineray says the recommendations contained in the SFF’s Roadmap for Action are not novel, with similar initiatives occurring around the world.
“In fact, in many areas, New Zealand is a laggard, and without progress or alignment to the changes occurring elsewhere, New Zealand may find its access to international markets is at risk. Our roadmap contains practical suggestions for improving the financial system by the end of the current decade.”
In the coming months the SFF will be working with Government, regulators, investment and financial institutions, businesses and the wider community to advocate for and implement the detailed recommendations of the roadmap. It will establish a process for reporting back on progress against the recommendations.