NZ scopes a green taxonomy to provide a common language on sustainable finance

The government has begun work with Toitū Tahua: The Centre for Sustainable Finance (CSF) and the Climate Bonds Initiative on a green taxonomy for New Zealand.

Tuesday, March 26th 2024, 6:45AM

by Andrea Malcolm

A green or sustainable finance taxonomy is a classification system for defining which economic activities and assets are aligned to a sustainable, low-emissions future.

It aims to ensure everyone is on the same page when talking about sustainability, thereby making it easier for investors, lenders and regulators to counter greenwashing and build transparency and trust.

The CSF has convened an independent technical advisory group (ITAG) to prepare non-binding advice on the design of a taxonomy rule book for NZ Minister for Climate Change, Simon Watts. It will deliver its recommendations in June.

It has partnered with the Climate Bonds Initiative (CBI), an international organisation working to mobilise global capital for climate action.

At a webinar last week, CBI head of taxonomies Matteo Bigoni said a NZ green taxonomy could be used to attract green capital and align it with major trading partners developing their own such as Australia, the UK and the EU.

Frances Sweetman, head of responsible investing at Milford Asset Management said in Europe about 5% of all investment is in green funds.

With KiwiSaver there is demand for green funds but not a high number in the market because there isn’t a common language which is a risk.

“If we have that, we can reduce risk so that KiwiSaver providers have confidence to offer these products.”

Adam Coxhead, head of sustainable finance BNZ said sustainable finance arose from super sovereign agencies and then large corporates.

“Part of it is validation and verifying investments. A taxonomy will help accelerate commoditisation of sustainable products and reduce cost and complexity.”

The CSF is collaborating with the Australian Sustainable Finance Institute (ASFI) which is advising the Australian government on its green taxonomy.

ASFI head of taxonomy Nicole Yazbek-Martin said there are four key design principles; credibility (transparency and being informed by latest science and technology), interoperability between jurisdictions, usability and prioritisation for impact.

Australia has identified six sectors to prioritise, covering its biggest emitters; building, electricity, mining, agriculture, manufacturing, and transport.

New Zealand is in the scoping phase and recommendations to the minister will include initial thoughts on priority sectors here.

Advice will take similar form to recommendations provided by ASFI to the Australian government which are on the ASFI website.

Tags: Milford Asset Management