CHECK AGAINST DELIVERY

Developing an Australian Sustainable Finance Roadmap

Jacki Johnson and Simon O’Connor, Co-Chairs, Australian Sustainable Finance Initiative

ANU Public Lecture ANU College of Business and Economics

22 October 2019 T2, Cultural Centre Kambri

Acknowledgement of Country

We acknowledge the Ngunnawal and Ngambri peoples who are the traditional custodians of the Canberra area and pay respect to the elders, past and present, of all Australia’s Indigenous peoples.

Introduction

We would like to thank ANU College of Business and Economics for hosting this lecture and, in particular, thank our panel moderator, Professor Israr Qureshi, for proposing the idea and assisting us to organise. In addition to being Professor of Social Entrepreneurship and ICT for Development at ANU, Professor Qureshi is a member of the Australian Sustainable Finance Initiative’s (ASFI) Civil Society Group.

Welcome and thanks to our distinguished panel:

• Adjunct Professor Bob McMullan, Climate Change Institute.• Dr John Hewson AM, Professor and Chair, Tax and Transfer Policy Institute,

Crawford School of Public Policy, ANU (member of ASFI Steering Committee).• Professor Bruce Chapman, ANU College of Business and Economics.

Challenging times

As we rapidly approach the beginning of the third decade of the 21st century, we find ourselves in challenging times.

For all of us, it will test our ability to lead, problem solve and collaborate to create a future we will all be proud of contributing to.

There is a rise in global geopolitical tensions in many parts of the world, presenting a

Page 1 of 12

challenge to a globally aligned political order. We are seeing economic growth stalling1, low productivity growth2 threatened by escalating trade wars, and record low global interest rates, with some even in negative territory.

We are facing a rapid demographic shift towards an ageing population, resulting in lower tax bases for the most developed economies of the world and greater costs to the public purse through health systems. Meanwhile, our populations continue to grow and concentrate ever more within our largest cities, along coastlines, putting great strain on the space, services and infrastructure and, here in Australia, threatening the very liveability that Australia is renowned for.

As in other countries, we see this flowing through to ever-greater demands on our existing physical infrastructure, whether those be roads, public transport, telecommunications, energy systems or water; many of these systems being of advanced age already.

This is also impacting negatively on our communities, with increasing social exclusion and inequality. Nowhere is inequality more notable than in the gap between Indigenous and non-Indigenous Australians.3

Concurrently, we see deteriorating public trust in many of our most important institutions, whether that be institutions of government or business and, it would be remiss not to mention at the outset, trust in the very sector we are going to focus on today, the financial services sector. Furthermore, as we speak, there continues a very live debate on the role of business in society, and to whom business is here to serve.

In addition, we are well and truly within an era of disruption:4 technological - with impacts across our workplaces and the very nature of work - as well as social and geopolitical.

Sitting across all of these, our challenges are magnified by a rapid acceleration of changes in our climate, which are increasing the frequency and severity of extreme weather events, bringing increased rain and wind in some parts of the country and other parts experiencing a hotter and drier Australia. This brings with it the need for a major restructuring of a global economy which is just beginning its shift towards a lower carbon world.

These challenges all impact on every Australian. Managed well, Australia can stay a strong, competitive country ensuring the wellbeing of all Australians. Managed poorly, Australia will be at risk of harming that very wellbeing.

As the McKinsey Global Institute reported earlier this year, any single one of these changes under way seems a significant challenge but, taken as a whole, they can seem incredibly daunting.5

As McKinsey argue, “[y]et the opportunities for the economy, business, and society that these global forces generate are equally compelling and are already creating new prosperity for those quick to harness them. Embracing the trends while mitigating their negative impact on those who cannot keep up and on our environment is the new imperative of our era.”

1 https://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019 2 https://www.weforum.org/reports/global-competitiveness-report-2019-searching-for-the-win-win-policy-space 3 https://www.sdgtransformingaustralia.com/#/2791/1369// 4 https://www.mckinsey.com/featured-insights/innovation-and-growth/navigating-a-world-of-disruption 5 https://www.mckinsey.com/featured-insights/innovation-and-growth/navigating-a-world-of-disruption

Page 2 of 12

And certainly this is true for Australia: the CSIRO’s Australian National Outlook Report from earlier this year showed us two alternative visions for Australia in 2060, with the positive scenario where we embrace these changes. If “we take decisive action and a long term view”, Australia as a nation clearly wins out through a stronger economy and stronger wages, and our environment and energy systems are healthier and cleaner, reaching net zero emissions by 2050.6 It will take strong leadership and collaboration and a long-term view from all parts of Australia. We have successfully navigated big transitions and challenging periods in our past, and we can no doubt do this again. These are some of the critical challenges we as a nation will need to address in this coming decade, and ever more urgently. Only by addressing each and every one of these challenges will we have the ability to maintain a strong and resilient economy and society, one that underpins the continued prosperity and wellbeing of all Australians – now and in the future. Uniquely, today more than ever before, these challenges are so closely interlinked that any responses must not address solely one element. This would result in the action being ineffective, and indeed could create harm to another part of the system. It is why collaboration is key: all parts of the system working together to avoid short term, knee jerk reaction that results in unintended consequences. However, we have to balance out this complexity with the need to act now. It is in recognition of this that the world has come together to set in train global agreements to address these complex, system-wide challenges:

• through the Paris Climate Change Agreement that has set in train a global response to climate change to maintain a temperature rise of well below 2 degrees this century, and to pursue efforts to limit rises to 1.5 degrees;

• The Sustainable Development Goals, under the 2030 Agenda for Sustainable Development represent 17 goals with 169 targets that, in sum, frame the challenges we must address to address social and environmental objectives; and

• The Sendai Framework for Disaster Reduction, an agreement to work towards the “substantial reduction of disaster risk and losses in lives, livelihoods and health and in the economic, physical, social, cultural and environmental assets of persons, businesses, communities and countries.”7

We’ve reached a unique period of time whereby our natural environment is ever more closely tied to our economic and social success, and vice versa.

6 https://www.csiro.au/en/Showcase/ANO 7 https://www.unisdr.org/files/43291_sendaiframeworkfordrren.pdf

Page 3 of 12

Global acknowledgment of this challenge Indeed, it’s a message that is cutting through deeply around the world. A global collaboration of over 45 central banks is working together under the Central Banks and Supervisors Network for Greening the Financial System. This is a collaboration to manage “both the opportunities and vulnerabilities for financial institutions and the financial system as a whole” in responding to environmental and climate change challenges.8 In its first comprehensive report in April this year, the network set out to clearly articulate the need for financial market regulators to stay ahead of such risks in the interests of economic and financial system stability. The Network, whose members include the Reserve Bank of Australia and Reserve Bank of NZ, highlighted the unique characteristics of climate change risks as follows:

- Far reaching impact in breadth and magnitude – impacting all sectors of the economy, in a non-linear manner.

- Foreseeable in nature – with the high degree of certainty of the physical and transition risks.

- Irreversibility – with scientists pointing to the high degree of confidence in the irreversible consequences over certain threshold levels of greenhouse gas concentrations.

- Dependency on the immediate actions – that today’s actions will determine the long-term severity of the impacts.

These are statements of agreement from a group of global financial sector regulators that have coverage across countries in five continents, responsible for over half of all global greenhouse gas emissions and oversight of two-thirds of the global systematically important banks and insurers.9 This emphasises that climate change is now a core economic and financial issue of our time and should not be seen as a peripheral issue. It must be dealt with alongside those other great challenges of our time as set out at the beginning of this speech and failing to do so will undermine the very future prosperity and wellbeing of our nation.

8 https://www.ngfs.net/en/first-comprehensive-report-call-action 9 In the RBA’s most recent Financial Stability Review (https://www.rba.gov.au/publications/fsr/2019/oct/pdf/financial-stability-review-2019-10.pdf), the bank warned of the rising financial stability risks of a failure to address climate change. The Bank highlights within this Review examples of the types of risks the financial sector will increasingly be exposed to that threaten to impact upon the Australian financial institutions. The Review states:

• increased “inflation-adjusted insurance claims for natural disasters in the current decade have been more than double those in the previous decade”,

• “That an increase in the frequency and severity of natural disasters will increase the incidence of damage to, or destruction of, physical assets that are insured or used as collateral.”

• “Assets that are exposed to increasing physical risk (such as property located in bushfire-prone or coastal areas) could decline in value, particularly if these risks become uninsurable.”

• “Climate change could also reduce certain types of business income that is used to service loans. Examples include changing rainfall patterns that result in lower or less predictable income from agriculture, more frequent storms disrupting supply chains and therefore sales, and damage to natural assets that reduces tourism income.”

Page 4 of 12

Global policy response underway Globally, financial markets are responding to these issues, and this response is accelerating by the week. Markets including China, Canada, EU, UK, Hong Kong, New Zealand and beyond are taking measures to respond to ensure that economies and financial markets are resilient, stable and prosperous through this coming transition. Globally, there are 730 hard and soft law provisions in finance regulations that embed such sustainability issues across some 500 policy instruments. This is very much a 21st century phenomenon with 97% of these laws having been enacted post 2000.10 Currently, many of the world’s peak financial regulatory bodies – across securities regulators, financial stability regulators, central banks, accounting and audit standards setters, insurance and pension fund regulators – are establishing new standards, requirements, guidance and protocols against which our Australian based regulators and peak bodies will start to, or already have started to, implement domestic regulatory guidance.11 Domestically, our regulators are already well progressed with such considerations already being embedded within the financial sector regulation and guidance, as articulated by APRA, ASIC, the RBA, as well as ASX and the Australian Accounting and Auditing Standards Boards.12 There is a momentum now moving to embed sustainability and climate risks into financial sector regulation that is rapidly accelerating.

10 https://www.unpri.org/pri/pri-blog/pris-first-sustainable-finance-policy-conference-heres-what-we-discussed 11 The peak body for securities regulators – IOSCO of which ASIC is a member – issued a statement in January this year highlighting the importance of disclosure on ESG matters by issuing companies, and emphasising the important role of the securities regulators “in protecting investors by facilitating transparency in capital markets”. The peak body of international standards – International Standards Organisation – is running a global process to establish standards and definitions in sustainable finance. The peak body of pension fund supervisors – the International Organisation of Pension Fund Supervisors (of which APRA is a member) - have been consulting on a draft supervisory guidelines for the integration of ESG factors in the investment and risk management of pension funds that will shortly be followed by the issuance of guidance. The insurance supervisors and regulators have also come together at a global level through both the International Association of Insurance Supervisors and the Sustainable Insurance Forum with a joint issues paper on climate change risks to the insurance sector (with APRA involvement in both organisations). And of course, the Financial Stability Board, the peak international body to promote international financial stability. The FSB has led the development of the Taskforce on Climate-related Financial Disclosures, setting out voluntary disclosure guidance on climate related financial risks. Australia’s Reserve Bank and Treasury are represented on the FSB. https://www.iosco.org/library/pubdocs/pdf/IOSCOPD619.pdf http://www.iopsweb.org/publicconsultationonthesupervisoryguidelinesontheintegrationofesgfactorsintheinvestmentandriskmanagementofpensionfunds.htm https://www.iaisweb.org/page/consultations/closed-consultations/2018/draft-issues-paper-on-climate-change-risks-to-the-insurance-sector/highlight=climate%20change https://www.iaisweb.org/page/consultations/closed-consultations/2018/draft-issues-paper-on-climate-change-risks-to-the-insurance-sector/highlight=climate%20change 12 See for example: Latest ASX Corporate Governance Principles encouraging listed companies with material exposure to climate change risk to consider making disclosures following the TCFD recommendations; ASIC recently updated guidance on climate change related disclosures; APRA stepping up its supervision of how banks, insurers and superannuation trustees are managing the financial risks of climate change to their businesses, setting out a clear status report in its Climate Change Information Paper in March 2019; RBA Deputy Governor having articulated a central bank view from an Australian perspective, delivering a speech in early 2019 setting out the first order economic effects of climate change, both through physical risks and through the transition to a lower carbon economy, and emphasized that an orderly transition would create better outcomes for the economy and financial stability, than a disorderly and abrupt transition; the peak body of accounting and auditing standards in Australia – the Australian Accounting Standards Board and the Auditing and Assurance Standards Board jointly issued a bulletin presenting guidance around financial disclosures of climate change related risks noting that this guidance is consistent with international Accountants Standards Board best practice interpretation of materiality https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-fourth-edn.pdf https://asic.gov.au/about-asic/news-centre/find-a-media-release/2019-releases/19-208mr-asic-updates-guidance-on-climate-change-related-disclosure/ https://www.apra.gov.au/sites/default/files/climate_change_awareness_to_action_march_2019.pdf https://www.rba.gov.au/speeches/2019/sp-dg-2019-03-12.html https://www.aasb.gov.au/admin/file/content102/c3/AASB_AUASB_Joint_Bulletin_Finished.pdf

Page 5 of 12

This reflects that finance must play an integral part in responding to these great challenges if any response is to be adequate to address the scale of those challenges we’re facing. For providing the capital, for lending to the businesses, for insuring the assets – there remains a critical and indeed essential role for finance to play. It is for these reasons that we are here today, as a finance sector, talking about issues that are of critical importance and relevance to our sector – sustainability, climate change, wellbeing, human rights, financial inclusivity, poverty alleviation. There is increasing realisation across the finance sector that these issues are indeed at the core of what we do as an industry13. There is an opportunity not just to manage risks, but also to finance new opportunities. When we consider what these new opportunities are, it is important that we think beyond how finance has operated before. If the finance sector’s expertise is harnessed through partnership and collaboration, there is the potential for us to find new models that can unlock investment in marginalized communities including in Indigenous communities. There are opportunities to address gaps in capital formation. Some of the opportunities include developing new impact investment markets, financing growing sustainability focused small businesses and developing a sustainability linked municipal and corporate bond market. Corporate Sustainability The finance sector itself is moving from corporate responsibility to corporate sustainability. Corporate Responsibility has tended to be more reactionary and utilised to build reputation. Whereas Corporate Sustainability is more effectively embedding social and environmental concerns with driving an organisation’s performance through its strategy and management systems; helping frame engagement with all stakeholders around the overall Purpose of the business. This is Sustainable Finance This, at its heart, is sustainable finance – the embedding of a broader set of considerations into financial sector regulation and decision-making in an effort to ensure:

• capital markets are adequately measuring, reporting and managing risks from the rapidly changing world of environmental and social sustainability factors that until recently has been seen to be peripheral to financial markets and the financial system;

• that capital markets are enabled to direct their resources towards funding those companies, assets and projects that matter in responding to these great challenges; and

• that sustainable finance does this by putting customers and the communities it serves at the forefront.

Sustainable finance is about the finance sector’s role in responding to these great challenges, in terms of directing the critical capital flows towards the types of assets we

13 This is reflected by many of our insurers, banks and investors being signatories to principles based global agreements such as the Principles for Sustainable Insurance, Principles for Responsible Banking and the Principles for Responsible Investment.

Page 6 of 12

must start building today to deliver the outcomes our economy and society need well into this century. It is about the finance sector playing a key and indeed critical role in addressing the issues of our time that will determine the shape of our nation well into this century. Will Australia be a thriving and prosperous country? Hotter and drier? Fairer? More inclusive? Supporting our marginalised communities? More productive? Cleaner? Smarter? And the potential for leadership by Australia? With an economy generating economic activity of $1.7 trillion per year, this is dwarfed by a finance sector with superannuation assets of $2.5 trillion and growing, a banking sector managing $4.2 trillion in assets, and over 8 million buildings across Australia with a replacement value of $5.7 trillion needing to be insured. All of that capital is moving around our economy underpinning the lending, investing and insuring decisions being made every day for our nation. It is shaping the businesses, households, communities and the very future of Australia. It is a truism to recognise the finance system as the fuel of the economy. Every decision to lend, or insure or invest is shaping our nation, every day – far from a hypothetical, the finance sector needs to be part of the solution for a sustainable resilient economy. Sustainable finance is about the finance sector acknowledging this key role, and indeed its responsibility, in contributing to the future Australia, to support the delivery of key national objectives, to play our role in key global goals, including those particularly critical goals of the Paris Agreement, the Sustainable Development Goals and the Sendai Framework. What we understand today is that a major shift in capital will be required to achieve these goals. Much work has been done estimating the capital requirements to achieve the SDGs and Paris Agreement. To name just one estimate, the OECD together with the UN Environment and World Bank Group estimate a $6.9 trillion task ahead for investment in infrastructure to achieve the SDGs and Paris Agreement.14 As a nation, and as a global community, we simply cannot achieve any of these objectives – economic, social, environmental - without a coordinated approach by the finance sector, and between the finance sector and other key sectors – be they civil society, government, academic, business and community. Due to the sheer scale and reach of the finance sector today, which is so deeply embedded across our economy and society, we need the finance sector playing its part if we are to reach our goals. Collaboration is a critical pre-condition of solving any of these challenges, to ensure we underpin ongoing prosperity and overall wellbeing and we work effectively together for a major transition.

14 https://www.oecd.org/environment/financing-climate-futures-9789264308114-en.htm In Australia it has recently been estimated by the Grattan Institute that we will need in the order of $150 billion in energy generation assets over the coming 30 years.

Page 7 of 12

Globally, many parts of the finance sector are positioning to play a much more proactive role consistent with those needs. The sector is moving primarily for three main reasons:

1. The regulatory environment is rapidly rising to a point whereby consideration of climate risks, environmental, social and governance risks, are all becoming a compliance issue for the sector, requiring disclosure, management, and oversight, and no longer an optional nice to have.

2. There is a growing understanding that strengthening relationships and trust with customers and employees and addressing environmental, social and corporate governance issues (ie ESG issues) – are all critical to manage to ensure stronger economic and financial outcomes – those companies managing climate change risk, and other ESG risks are demonstrating a stronger financial performance, making better investments, and are presenting lower risks.15

3. Our clients, members, beneficiaries expect this of us: quite simply, Australians are increasingly expressing their expectation that their investments, their banks and their insurers are working in a way that is respectful of communities, that does no harm, that is ethically driven, and that plays a constructive role in Australian society. Just one example of this expectation is provided by consumer research by RIAA that highlights that 92% of Australians expect that their superannuation or other investments to be invested responsibly and ethically.16

Audience As you can see, for you in the audience, whether you are an economics student, business student or student in the social sciences, your leadership will be key! The areas of economics, finance, behavioural science and sustainability will be ever more intertwined across your own careers. Your careers will be dominated by answering many of these toughest of questions. Problems we’re trying to solve There are two sides to the overall issue:

• 1 as the central bankers and groups such as WEF continue to articulate, there are significant risks to our prosperity as a nation if we’re not successfully dealing with these key structural environmental and social issues; and

• 2 there is a massive opportunity in addressing these sustainability issues and creating a competitive advantage – as the world moves to address these risks, sustainability will become a key economic driver of the 21st Century.

Australia’s finance sector is exposed on all sides: the risks and the opportunities, direct business operations and those we do business with, as well as the rapidly changing transition to respond to these challenges, across multiple markets, both domestic and global capital markets.

15 These factors have for too long been erroneously named non-financial issues and yet time and again they are rapidly translating into very core financial and risk issues. This is the fact that is increasingly being reflected in the comments of the RBA, APRA, and ASIC and other global regulators, but are also now very well established in finance and investment having been well articulated in academic studies. See for example: Sakis, Pinney, and Serafeim (Harvard Business School) ESG Integration in Investment Management: Myths and Realities, Journal of Applied Corporate Finance 28, no. 2 (Spring 2016): 10–16) and Friede, Busch, and Bassen. ESG and financial performance: aggregated evidence from more than 2000 empirical studies, Journal of Sustainable Finance & Investment 5.4 (2015): 210–233 16 https://responsibleinvestment.org/wp-content/uploads/2017/11/From-values-to-riches-Charting-consumer-attitudes-and-demand-for-responsible-investing-in-Australia-2017.pdf

Page 8 of 12

A real example of where different parts of the society are working together to solve the challenges facing communities is the impact of increased extreme weather events on communities. The Australian Business Roundtable for Disaster Resilience’s research report in 2017 highlighted how 9 million Australians, over a period of 10 years, have been significantly impacted by weather events. Australia enjoys the highest penetration of property insurance cover. The majority of Australians are able to access insurance for their house or business. This means that communities have a stronger chance of financial recovery after devastating events. However, with increased risk from extreme weather the price for some Australians has been accelerating. Insurers need to accurately price for the risk to ensure they are around to pay the claims. This is called sound financial stability which in fact this is expected by the financial regulator. The biggest risk we face is insurance not being available at all. Australia has not faced the same issues as other countries where reinsurance capital was not available due to the risks being too high. Australian insurers are working with investors and reinsurers to ensure they secure ongoing capital that makes sure Australians can access property insurance. The government is working with insurers to identify the critical investment required for mitigation, with progress this past week as an additional $50 million per year in funding for mitigation activities was agreed, targeted at reducing the impact of extreme weather to vulnerable communities. Moves towards a partnership approach to catalyse sustainable finance It is within this context, this great task and challenge ahead, these rapidly shifting expectations, that the finance sector in many major markets of the world has set in train broad, industry wide collaborations to set out a coordinated approach to catalyse sustainable finance. In many cases, these have been named sustainable finance roadmaps – coordinated plans that aim to align the finance sector with national and international economic, social and environmental goals. To date, sustainable finance roadmaps have emerged in some of the world’s largest and smallest countries presenting recommendations with pathways including policy signals and frameworks to enable the sector to contribute more systematically and in a coordinated way towards these global goals:

• The EU is well progressed with its Action Plan on Sustainable Finance, built off an industry High Level Expert Group who reported in early 2018.

• More recently the UK has released its Green Finance Strategy. • A Canadian Expert Panel on Sustainable Finance recently produced a final report

to Government. • The NZ Sustainable Finance Forum (through the Aotearoa Circle) will shortly

present their initial report.

Page 9 of 12

Similar initiatives are being noted in China, Indonesia, Norway, France, Sri Lanka, Luxembourg, Singapore, Hong Kong and many other nations.17 To date, the momentum has grown so fast that it is increasingly hard to keep track of all the global initiatives focused on sustainable finance. Today in Australia, more than ever before, our financial services sector operates as part of a global market. Our finance sector operates in a way that secures capital from across the world to lend to households and businesses, insure businesses and property and provide investment returns to the mums and dads who have invested in their superannuation. In this way, we are already being impacted by this rising focus on sustainable finance, the regulatory shifts in major markets and the increasing opportunities that this brings. The Australian Sustainable Finance Initiative In response to this context, the industry has come together in a collaboration under the name of the Australian Sustainable Finance Initiative to set out a coherent plan for the role finance should play in responding to these great challenges for our times. After a conference of the regional finance sector in July 2018, hosted together with the UNEP Finance Initiative, a commitment was made by leading finance sector organisations and peak bodies that it was time for our sector here in Australia to step up and work together on a coordinated plan to respond and proactively shape the pathway that finance must take in aligning with a resilient and sustainable economy. Launched in March 2019, the ASFI now has brought together 130 professionals from across 80 organisations, primarily made up of representatives of Australia’s leading insurance, banking and investment firms, together with representatives from academia and civil society. Overseen by a Steering Committee of 18 senior leaders across the full financial services value chain, the initiative is now researching, consulting, and developing the sustainable finance roadmap for Australia. Such a roadmap is to set out a coordinated plan, a proactive response, for the finance sector to respond to these challenges:

• How do we ensure a stable and resilient finance sector in light of a changing climate and shifting social context?

• How do we ensure finance is working in alignment with our global and national goals, such as the Paris Agreement and SDGs?

Critically, this has been established as a cross sectoral initiative, with a broad collaborative remit to join dots of existing activity, to work with stakeholders from across civil society, academia, regulators and government, at local, state and federal level. Importantly for this initiative, we have seated at the table key observers, including from APRA and ASIC, but also from across many levels of government.

17 Sources include: http://unepinquiry.org/wp-content/uploads/2019/03/Sustainable_Finance_Progress_Report_2018.pdf

Page 10 of 12

ASFI has been set up to deliver a roadmap in mid 2020; a plan that will set in train the pathway for the finance sector over the coming decade and beyond. The objectives we are attempting to answer are based across four themes:

1. Mobilising capital

2. Enhancing the sustainability, resilience and stability of the financial system;

3. Ensuring better informed financial decisions; and

4. Delivering a financial system that meets community and consumer expectations. Our process is big, it’s wide, and it’s deep. It’s been intentionally set up as a process that is:

• Inclusive to ensure a broad set of stakeholders’ views are heard.

• Informed by a wide base of expert knowledge.

• Designed to deliver recommendations that are practical and implementable.

It represents a broad collaboration committed to working on this great task of solving complex problems. And, to achieve this, we are firmly of the view that a coordinated and broadly collaborative approach is essential. To do this, the finance sector itself have stepped up to fund this initiative. To date, we have raised funds to establish a secretariat, with funding provided by a host of organisations who recognise the importance of a sustainable finance sector including ANZ, Australian Ethical Investments, Bank Australia, Commonwealth Bank of Australia, CBUS, Insurance Australia Group, National Australia Bank, QBE and Westpac. But more than funding, we must acknowledge the energy and commitment of the many, many people involved in this process contributing their expertise, skills and time in a voluntary basis. As much as anything else, it is this collaboration that gives us great optimism of the ability to achieve this ambitious agenda. ASFI recognizes that the health, sustainability and stability of our economy is inextricably linked with the health, sustainability and stability of our people, society and the natural systems on which we all depend. For Australia to continue to prosper in the 21st century, we need to realign the systems that underpin our economy to support human wellbeing, social equity and our environment. The financial system is one such system that requires realignment with this purpose, to ensure investment, banking and insurance is closely aligned with our national and global commitments to sustainable development, climate change and human rights, and delivers a prosperous, equitable and inclusive economy for all Australians. To deliver upon Australia’s international commitments while meeting the expectations of Australians now and into the future, we need a financial system that is aligned to these commitments. The financial sector is an essential driver of the Australian economy and will be an essential part of funding and underwriting this future Australia, providing the capital necessary to deliver on these sustainable development commitments. Through this

Page 11 of 12

alignment, the financial sector can build a healthier, more stable and sustainable financial system and nation. Importantly, a sustainable finance roadmap is not a set of asks of government, but rather it will set out a plan for the finance sector, looking at a full suite of levers to achieve these objectives. Recommendations in the roadmap will likely look at options within codes of practice, industry practices and culture, regulation and guidance, and legislation. Conclusion In conclusion, whenever we face long term complex challenges it takes collaboration, partnership, commitment and courage to lead in a way that has a sustainable impact commensurate with the challenge we are facing. The need to realign Australia’s finance sector to support greater social, environmental and economic outcomes for the country is now essential and urgent. We know that we don’t hold all the answers but it is through a strong collaborative approach - such as the one we have established with the Australian Sustainable Finance Initiative - that we can bring together views and tap the brightest minds, based on the best evidence, to set out a sustainable finance roadmap for the decade ahead.

Page 12 of 12