On 23 November, 2020, the Centre for Policy Development (CPD) co-hosted a public forum with Climateworks Australia as part of the Climate and Recovery Initiative. The event featured APRA Executive Board Member Geoff Summerhayes, Climateworks Australia CEO Anna Skarbek, and AustralianSuper Chair and former Australian Ambassador to the United States, Don Russell, in conversation with CPD’s Travis MacLeod from CPD.

In his presentation, Geoff Summerhayes reflected on his five year tenure on the APRA board and discussed the progress made in addressing climate
‘We are now a better place for this challenge,’ he said, ‘and we need to be because we are confronting fundamental questions about our institutions, competitiveness and risk preparedness in global capital markets that will be reshaped by an accelerating pace by the impacts and responses to climate change.’

He argued that firms increasingly see climate risk as financial, foreseeable and actionable.

‘There has been a rapid transition in the larger firms mindset to incorporating climate in strategy, governance and risk management. We’re seeing a significant shift towards industry ownership and leadership on climate risk.’

Geoff Summerhayes

He concluded by looking at the road ahead, particularly in the context of the covid pandemic and the global recovery.

‘I’m encouraged that we’re up for the challenge not just of responding to risk but of seizing the new financial sector opportunities that will flow from this next industrial revolution to a low carbon future, which, like previous transitions, will not only require a massive investment, it will also create a wealth of opportunities and leave a raft of stranded assets weighing on those that didn’t see it coming. I’m fond of the quote: history doesn’t repeat itself, but it often rhymes. Australia has led by example during the pandemic. We can be justifiably proud of our leaders at all levels and across all sectors of the community. We’ll need all of that and more for the climate change challenge.’

In response, Anna Skarbek thanked Geoff Summerhayes for his insights and leadership

‘As you mentioned, we’re at a really pivotal moment, and while there’s a lot of more hard work to do, we’re in a stronger position thanks to far greater focus across regulators and industry on understanding integrating climate risks into decision making and building climate related capabilities.’
She spoke about the power of investment in achieving accelerated climate action.

‘Encouragingly, the federal government remains committed to the Paris Agreement and has recently declared that it’s committed to reaching net zero emission as soon as possible. All the states and territories have formally committed to achieving net zero emissions by 2050 – and we know our research shows it is possible to achieve this by 2050 nationally.’
She discussed the necessity of large scale investment in emerging zero emissions technologies, including in harder-to-abate sectors of the economy, and listed the recent ambitious announcements made by many of the states
Yet she also sounded a note of caution.

‘The reality is that the implementation actions by government and businesses still don’t yet go far enough. There is still a new surge of investment that’s needed. And so if we are to be aligned with net zero and what the Paris Agreement calls for so we must turn now to the ‘how’ rather than to the ‘if’ some of this should be done. And whilst Australia might have a more challenging starting position, given the resources sector of our economy, it requires leaning into that and facing the choices now rather than delaying them. Because the worldwide direction is only one way, towards decarbonisation. We know we can’t slow that down, but we could slow down our markets readiness, unhelpfully.’

She discussed backcasting as a strategy to reach the 2050 goal, stressing the need for sector wide alliances, the catalysation of whole supply chains and the development of new products and services for decarbonised solutions.

‘Our research shows it can be done, but it requires what we call ‘all in’ effort in terms of accelerating the investment across all of the sectors and getting that initial surge occurring so that markets have their own momentum. And I hope that all of us today can apply in our own work that thinking of breaking down the next 10 years into your corporate planning periods of three or five.’

Anna Skarbek

Don Russell discussed the importance of the recent US election.

‘I’m sure there are still those fearful that we will look back and we will see that Trump was the first of the mad US presidents. But for the time being, I think we should all think that the US has stepped back and has reconsidered the last four years and has signed up to a more orderly and rational approach to public policy making.’

But he noted the obstacles that remained, such as the Republican control of the Senate and the tensions between China and the US.

‘It may well take more discord before China and the US are willing to cooperate. So I think, you know, collectively we should look forward and plan assiduously for COP 26, but we shouldn’t allow ourselves to be totally disappointed and devastated if COP 26 doesn’t prove to deliver the results that we’re looking for.’

Don Russell

At the same time, given the real opportunities that existed, he argued that Australia needed to play a proactive role in the process, rather than being seen as a laggard. In that light, he discussed AustralianSuper’s decision to establish a carbon neutral portfolio by 2050.

‘It’s important to realize that the fund will always, does always act in the best interests of members,’ he said, ‘and that our commitment around carbon neutrality by 2050 comes very much from an active role of incorporating climate risk into the investment decision. So this is not a solution that we’ve imposed on the portfolio: it’s what grows out comes out of a long term view about the importance of climate risk in the long term returns of our members.’

You can watch the full recording below and at the Centre for Policy Development website.