Climate crisis solution is finance: Shaw

Climate change minister James Shaw says financial thinking is the way out of the climate crisis.

Tuesday, May 18th 2021, 6:21AM

by Daniel Smith

James Shaw

When James Shaw was asked at an FSC event how New Zealand can successfully lead the way through an impending climate crisis, he answered with one word: “finance”.

“I’m not being disingenuous here. The way for everyone to be a winner, to be a bit cute about it, is to work out how to finance the transition.”

Shaw used the example of Synlait making the transition to more expensive electronic milk boilers against traditional advice, by looking to price the asset against its entire life time frame.

The move turned out to be a winner both from a climate impact perspective as well as a financial one.

But crucially for Shaw, it shows a way for financial thinking to be used to pave the way for a positive climate future.

“This notion of pricing the externalities, means actually making those [climate related] costs visible. With things like an ETS price, or a waste levy, these are blunt instruments but they are about as good as we’ve got at the moment.

“But with where the sector is now getting to, with climate related reporting, and therefore pricing, we will start to see those things become a lot more sophisticated, and economy wide rather than sector specific.”

Central to Shaw’s speech was the need to find a way to get across the immense sense of scale the climate crisis will bring about.

But Shaw believes financial services has a role to play, as experts in dealing with complex situations that unfold over a long period of time.

“When you think about [carbon price indexing] you can often think about it as a liability. But if you look at it through the financial services lens, there is a whole sector of transitional finance there which we haven’t yet even started to explore.”

Shaw says the exploration of solutions to transition New Zealand businesses is a mission the public and private sector need to engage on together.

Financial Services Council chief executive Richard Klipin says the role of the [financial services] sector is to partner with government and to partner with regulators to "...make sure that we get on the road to positive change from a climate perspective".

“Because the sector deals with billions of dollars our ability to influence where money flows, and how New Zealand consumers think about investing their money is a really important role. We really welcomed the recognition of this from Minister Shaw,” Kilpin says.

“In combatting these issues there is a huge innovation cycle that has started, which I think will only accelerate. Businesses and start-ups finding capital to innovate is a key part of this discussion.

“It is the role of financial institutions to think about how do we build, accelerate and grow positive climate innovation.”

Tags: Climate Change climate risk reporting FSC James Shaw Richard Klipin