Sustainability lag risks NZ trade

New Zealand exporters will face trade barriers and risk losing customers if they don’t meet fast changing expectations around ESG issues, according to a progress report on sustainable finance.

Wednesday, December 21st 2022, 3:08PM

by Kerry Meadows-Bonner

Toitū Tahua: Centre for Sustainable Finance’s inaugural report on how New Zealand is tracking on the Sustainable Finance Forum 2030 Roadmap for Action, shows we are slipping behind Australia and other trading partners.

The two year old roadmap lays out a plan for redirecting capital and resources to transition to a low-carbon, more sustainable, equitable economy but despite the government’s introduction of mandatory climate-related disclosures, New Zealand’s progress is slow and uneven the report shows.

Toitū Tahua CEO Jo Kelly says New Zealand cannot lag on international reforms on sustainable finance given our economy’s inextricable links to global shareholders, investors and consumers.

She points out that although only larger businesses are required to comply with the new climate reporting rules, they will be obliged to look at the carbon footprint of the many small businesses that make up their supply chain.
The report’s release comes not long after the Australian government announced a raft of national sustainable finance projects, including an all-of-government sustainable finance strategy and a sustainable finance taxonomy.

Call to large KiwiSaver providers

Kelly says there’s also an urgent need to direct investment into developing homegrown climate solutions, citing KiwiSaver funds which are investing large amounts of New Zealand capital offshore enabling the sustainability objectives of other countries.

“Our capital should be working in Aotearoa New Zealand to aid our transition. If large KiwiSaver providers invest just 1% of their portfolios in unlisted companies with positive social and environmental impacts, it would unlock almost $1b a year for investing towards improved outcomes in housing, education, healthcare, renewable energy and low-carbon technology, without compromising commercial returns.”

One of the reasons this isn’t happening is because of current KiwiSaver legislation which places a premium on funds being readily available and liquid. That skews investment towards investing in secondary markets.”

Kelly says KiwiSaver rules should increase access to private, unlisted markets in New Zealand. “We have high levels of innovation and world leading tech being developed here, we just need to get more capital flowing to these opportunities. They are often very risky and early-stage investments, and a KiwiSaver manager would mitigate this through diversifying the investments made in this space. Boutique KiwiSaver managers are leading in private markets in New Zealand - the large bank KiwiSavers need to do more as they could really turn the dial with their scale.”

Only one, to set up the centre to oversee action on the roadmap, of the 11 main roadmap recommendations has been completed. Six areas (capability, governance, disclosure, government leadership, financial system resiliency, and standards and pathways) have had “some solid progress”, but in most cases not enough has been done to achieve change by 2030. Action on responsibility (requiring company directors and others in finance to factor in ESG), quality climate data, and inclusion where if financial products and services are regarded as a utility, no-one should be excluded due to hardship, showed little progress.

The full report is available on the centre’s website.

Tags: Sustainability