SYDNEY (REUTERS) – Australia could face rising costs of capital and divestment by offshore funds if it is not seen to be doing more to address climate change, a top central banker said on Thursday (Oct 14).
Reserve Bank of Australia (RBA) deputy governor Guy Debelle said foreign investors were increasingly bringing up the issue of climate change with the RBA, Australian corporates and government debt managers.
This had potential implications for the cost of and ease of access to capital for Australian corporates and the government, he said in an online speech.
“To date, we have only isolated examples of divestment from Australia because of climate risk, but the likelihood of more significant divestment is increasing,” Mr Debelle said.
The warning comes as Prime Minister Scott Morrison’s conservative government is debating whether to commit to a net zero emissions target by 2050.
Mr Morrison is facing internal opposition from the junior partner in his coalition government about strengthening climate targets ahead of the COP 26 summit in Glasgow later in November.
Treasurer Josh Frydenberg last month warned Australia had to match developed nations and commit to cutting emissions to net zero by 2050, or face higher borrowing costs.
Mr Debelle said investors globally were adjusting their portfolios in response to climate risks, while governments were implementing net-zero policies.
“Both of these are effectively increasing the cost of emissions-intensive activities in Australia,” he said. “So, irrespective of whether we think these adjustments are appropriate or fair, they are happening and we need to take account of that.”
Mr Debelle emphasised that countries had to transition to a low-emissions economy in a sustainable manner, and this would require funding for projects with varying degrees of emissions intensity, not just those with zero.
“Simply shutting down parts of the economy is unlikely to deliver a socially optimal transition,” Mr Debelle said.
Australia is one of the world’s largest exporters of coal and has come under international pressure to scale back those operations.