Budget 2023: Signal of ’Tetris moment’ for responsible investment

With significant action towards sustainable finance announced in the 2023–24 budget, the building blocks are now in place for meaningful change, according to Responsible Investment Association Australasia’s (RIAA) chief executive, Simon O’Connor. 

Speaking at the RIAA’s Responsible Investment Australia 2023 conference, he noted that “enormous metamorphosis” was expected for the industry in the coming years.

“This area of ESG, responsible investment, [and] sustainable finance, has rushed rapidly to the top of the priority list for those across financial services, in our country and globally,” O’Connor said.

“We welcome the state we find ourselves in today. But now we’re in the midst of a massive transition, and over the next three to five years, the broader financial services sector will go through an enormous metamorphosis, an enormous change, as we land on many of the things we’ve all advocated for decades. They will be hard-wired in laws, standards, codes, and legislation which is being written now and will change the face of financial services”.

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RIAA applauded numerous budget commitments announced on 9 May that would boost Australia’s sustainable finance sector, including $1.6 million to co-fund with the private sector the development of an Australian sustainable finance taxonomy; $8.3 million over four years to develop and issue sovereign green bonds; and $4.3 million to bolster ASIC’s enforcement action against greenwashing and funding for social impact investment, including a $100 million Outcomes Fund. 

Previously, Assistant Treasurer Stephen Jones had said the government would prefer doing “too much too soon” rather than “too little too late” on its sustainability agenda.

Speaking at the 2023 Australian Council of Superannuation Investors Annual Conference, he said: “Investors need a common language and standards to measure what is green and sustainable. We’ve spoken before about the critical role that we see for a taxonomy that aligns with global standards but has an Australian accent. 

“Capital markets can’t work effectively unless there’s transparency and credible information. Australia can’t sit back as new rules on what is green and sustainable are being written offshore without our engagement.”

O’Connor highlighted how such active engagement from the government showed real promise for the development of strong, sustainable finance in Australia. 

“In many ways, I would call this our Tetris moment, where all the building blocks are falling into place, and it’s up to us to ensure they fall into the right spot in the right way that is consistent with what we’ve been working to achieve as a responsible investment sector,” O’Connor stated.

“It’s not been a very eventful night for the responsible investment sector for the last decade.

“Finally, we’re seeing some early signs of a government moving to support this sector and to recognise the essential role we play in terms of capital being directed to support the great transition, the great social challenges of our times.”