Achieving prosperity in a carbon-constrained world demands a transformation of Australia’s economy. Current systems of consumption and investment are overly reliant on fossil fuels and are vulnerable to rising fuel costs, the global spread of carbon pricing, and the impacts of climate change. The Climate Institute's work aims to support this economic transformation. We work to ensure the right policy frameworks are established, that key sectors of the economy are heading down the transformation path and that the institutional capital required to invest in the low-carbon economy is in place.
As we look ahead, it is critical that we see Australia’s national emissions in decline, with significant measurable improvements in key areas of the Australian economy, including energy efficiency, renewable energy, carbon farming and transport.
For example, Australia’s electricity generation currently relies predominantly on carbon-intensive coal-fired power. To shift the sector to low- and zero-emissions electricity production, we support three complementary policy pillars: carbon pricing; support for research and development; and policies to drive clean energy deployment and cost reduction through market experience.
The role of long-term institutional investors is also critical in this space. Today, some US$52 trillion of assets are under management by pension and superannuation funds around the world. If only five per cent of these funds were re-allocated to low-carbon industries such as clean energy and low emissions transport, the world would be closer to meeting greenhouse gas emission reduction targets and avoiding dangerous climate change.
The Climate Institute’s key engagement with institutional investors is through the
Asset Owners Disclosure Project (AODP), which seeks to gain information from the world’s 1,000 largest asset owners regarding how they manage climate change risks and opportunities. This covers every aspect of their operations: from how they incentivise their fund managers and advisers to how they invest in low carbon assets; how they build risk strategies through to governance and how they communicate with their members.
This information allows us to pinpoint trends in best practice, and significantly, it allows us to create a league table of how these funds are performing in terms of managing climate change-related risks and opportunities. Once pension and superannuation members make the connection between their retirement nest eggs and the ability to create a low-carbon, resilient society, there will be increased emphasis placed on long-term sustainable investments.
