Australia: $35 Trillion Investor Group Warns Of “Climate Ghost Towns”

The Investor Group on Climate Change, representing investors with $35 trillion in AUM, has warned that - without action - climate-related damage could see ghost towns, damaged infrastructure, and abandoned industries across Australia's exposed regions.

Banks and insurers are already beginning to withdraw financial services from climate-exposed regions and industries. The economy's current settings could see investors follow, accelerating climate-related capital flight.

The risks of climate-related damage and disruption must be met with a comprehensive plan to stimulate private investment in resilience and adaptation, because public finances cannot cover the necessary scale of investment.

It is in the common interests of governments, businesses and Australia's largest investors to protect the productive capacity and growth in the Australian economy.

Australian businesses and industry are well-positioned to create new adaptation jobs and growth, developing and exporting resilience products and services to the world, whether in agriculture, asset hardening, early warning systems, or other innovations.

IGCC has released its new report, Activating Private Investment in Adaptation: Turning Capital Flight Risk Into the Next Multibillion Opportunity, as the federal government is working on its next major climate priorities: The National Climate Risk Assessment and Australia's National Adaptation Plan.

The report was co-written by IGCC and leading climate risk consultancy, ERM Energetics.

Quote from CEO Rebecca Mikula-Wright:

"No one wants to see ghost towns and broken-down factories across northern Australia, but that's what could happen unless billions are invested in climate resilience and adaption.

“Investing in resilience is investing in communities, creating jobs and protecting our nation now and in the future.

"Australia's leading investors are already working with government, businesses, and local communities to build resilience and support adaptation innovation, but they face strong headwinds and we need a systemic approach.

“We need to scale down emissions as fast as possible, but some climate damage is already unavoidable so we need to address it.

"Investors know this will be a long process, but the first step is the government setting a resilience mission that's on-par with Net Zero emissions by 2050; everyone needs to know it and get serious about doing their part."

--

The new research report shows that to sufficiently scale up investment in adaptation and resilience, four core barriers need addressing:

Current Barriers To Private Investment in Adaptation

• challenges in quantifying the financial implications of physical risks and adaptation
• lack of market recognition for resilience in valuations
• difficulties in cost-sharing when adaptation benefits are spread across stakeholders
• asset-level resilience is normally insufficient to protect value if whole-of-system resilience is lacking.

These barriers are overlaid with investors’ fiduciary duties, which include meeting beneficiaries best financial interests.

Key Recommendations to Stimulate Private Investment In Adaptation

1. The National Adaptation Plan should be legislated and on-par, in impact and prominence, with the Net Zero Australia plan. It should include:

• a national objective for resilience, plus plans for key economic sectors.
• a clear list of priority resilience projects (e.g., the Infrastructure Priority List).
• resilience and adaptation plans for key economic sectors

2. Investors should align their portfolios to the national resilience objective and plans, through target-setting and continuing progress.

3. The mandates of all specialist investment vehicles (SIVs) expressly include adaptation and resilience (current SIVs include National Reconstruction Fund Corporation, Northern Australia Infrastructure Facility, Regional Investment Corporation, Clean Energy Finance Corporation, and Australian Renewable Energy Agency). SIVs have historically stimulated private investment alongside public funds.

4. The government should invest in sovereign scientific capability and resources, including robust, high-resolution climate and hazard datasets and five-year scientific plans.

5. Investors should rapidly build expertise in understanding and managing risks of climate-related damage and disruption.

6. Governments should review relevant regulations, including town and landuse planning, so they consider resilience over the full expected life of effected assets.

These barriers and recommendations are expanded upon in the full report.

Quote from ERM Energetics Principal Consultant, Olivia Kember

“Mandatory climate-related disclosures, along with and increasingly sophisticated climate risk modelling tools may reveal dangerous levels of unpriced climate risk across the economy.

This is something the market and the government can address together, but a disorderly process may trigger a race for the exits.”

Quote from ERM Energetics Finance Sector Lead, Stephen Catchpole

“Climate-proofing the economy offers significant returns on investment, and the companies providing those climate-proofing services should become a fast-growing source of value over coming years.

But this requires creating opportunities at levels beyond individual assets to build resilient systems and communities.”

© Scoop Media