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INDUSTRY NEWS: From Green Building Council of Australia and Australian Sustainable Finance Institute

This week, Green Building Council of Australia and the Australian Sustainable Finance Institute released a practical guide to drive greater understanding of sustainable finance for the real estate and finance industries.

The guide looks in detail at the mechanisms available, with the aim of simplifying their adoption in the Australian market and unlocking the environmental and investment opportunities available.

GBCA chief executive Davina Rooney said that the guide served as key to more collaboration between the real estate and finance sector, which is essential to meeting Australia’s climate goals.

“While our leading property companies continue to top international sustainability benchmarks, sustainable finance will be the key to extending this progress across the sector more broadly,” Rooney said.

“Australia is on the cusp of a sustainable finance revolution, and when this opportunity is unlocked, the gains for global sustainability will be enormous.

“This is an exciting, and much-needed, opportunity to deepen cross-sector understanding of what’s possible as we move closer towards our decarbonisation goals.”

Key statistics

  • in 2022, the debt market raised more funds for climate-friendly projects than for fossil fuel companies, suggesting a global shift towards green debt issuance, a trend expected to continue in 2023.
  • the property sector accounted for more than 8 per cent of the total sustainable finance market in 2022, with issuance to real estate projects reaching $US127 billion. Australia contributed around 2 per cent to this, at just over $US2.5 billion.
  • so far in 2023, 44 per cent of loans issued to Australia’s real estate sector have been labelled sustainable financing, marking a significant increase from previous years.

Future investment opportunity in numbers:

  • the commercial real estate sector boasts over 859 million square metres of floor space. This number is projected to double by 2050 to accommodate the growing demand for offices, retail spaces, and other facilities.
  • the residential sector has about  10.9 million dwellings as of June 2022, with about 200,000 built annually. By 2040, that number is expected to increase by 43 per cent.
  • 80 per cent of the buildings in 2050 have already been built. Improving energy efficiency and transitioning these buildings to renewable energy represents another major opportunity for sustainable financing.
  • of the existing dwellings, approximately 5.2 million are connected to the gas network, with another million using propane. These are expected to eliminate their use of fossil fuels between now and 2050 to meet our Paris Agreement commitments.

To achieve net-zero carbon targets by 2050, Australia must:

  • electrify more than 500 homes daily, including on weekends, and improve the energy efficiency of 100 more each day (approximately 200,000 homes and apartments in total a year.)
  • retrofit nearly 3.5 per cent of its current non-residential stock annually, a significant jump from the present rate of 1 per cent. This would mean increasing the current rate of retrofit investment from $500 million to about $1.5 billion to $2 billion. 

But wait, there’s more

At the same time, the Australian Sustainable Finance Institute also released its annual Australian Sustainable Finance Progress Tracker report, which found that a step change in leadership has now set Australia on the right path regarding sustainable finance policy – although the speed of uptake still leaves much to be desired.

The report by found that the nation is now sitting just above a passing score of 2.6 out of 5.

The score is an average of all marks awarded based on the nations’ progress across 36 recommendations set out by the institute and its industry partners and was a small improvement by 0.6, compared to the 2022 average.

Australia now an early follower

Australia is moving from laggard to “early follower on sustainable finance to advancing a world-leading sustainable finance taxonomy. Its agenda is to introduce mandatory climate disclosure for Australian firms from 1 July 2024 and develop a framework for Australia’s first sovereign green bond issuance.

These fundamental pillars of sustainable finance policy will help mainstream climate within Australian financial institutions, allow sustainability-related claims to be substantiated (or debunked), and position Australia to influence the development of international sustainable finance frameworks.

ASFI chief executive Kristy Graham said, “I am delighted at the progress we have seen on implementing the Australian Sustainable Finance Roadmap over the past year – including mandatory climate disclosure, a sustainable finance taxonomy, and deeper international engagement.

“But there is more to do.

“Gaps remain, and moving forward, we need to focus simultaneously on bedding down existing reforms and developments and pursuing greater ambition in key areas.

“Australia is now positioned to take on a leadership role, and I look forward to seeing us rise to that challenge over the next 12 months.”

Where to next?

The Progress Tracker results underscore the task ahead to translate targets and policy into on-the-ground impact to decarbonise the economy, restore Australia’s natural capital and support greater levels of wellbeing across Australian society.

Over the next 12 months, bedding down and supporting the implementation of existing reforms will be important. For the government, this includes ensuring a smooth commencement of climate disclosure requirements and supporting a complete sustainable finance taxonomy for mitigation and adaptation.

For financial institutions, this means investing in capability uplift across their organisations on sustainability and continuing to translate net zero targets into concrete transition plans.

At the same time, the urgency and magnitude of the sustainability challenge demands additional action.

The Progress Tracker identifies a range of quick wins and priorities, including ensuring the forthcoming Government Sustainable Finance Strategy sets a high bar for ambition across government, laying the ground for sustainable finance policy beyond climate, clarifying and streamlining the operation of competition law to support climate-related collaboration, and deepening Australia’s international engagement on sustainable finance.

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