Roadmaps and Regulation: Sustainable Finance in Australia

Abstract

Designing effective climate finance regulation (reshaping of the financial system to accelerate low-carbon investment) is complex. This article argues that the most acceptable mechanisms: the provision of greater climate change information and improved climate risk management and disclosure, do not go far enough and will prove insufficient to accelerate the transition to low-carbon finance. The imposition of Risk Weightings and Capital Requirements, various initiatives by the Reserve Bank and mechanisms targeted at changing corporate culture and addressing short-termism, will also be helpful. So too will measures that increase awareness of senior corporate decision-makers that their fiduciary duty extends to considering the impacts of climate change on their business. The broader challenge is political. Those regulatory mechanisms that might be capable of most effectively intervening in the market are also those that are most threatening to powerful vested interests, including the fossil fuel industry.