In October 2018, the Investor Group on Climate Change (IGCC) convened a stakeholder workshop in Auckland, focused on scaling-up and accelerating low-carbon, climate-resilient investment by New Zealand investors. The aim was to raise understanding of the current state of play and market practice, and to identify barriers and practical solutions. There was broad interest and participation from financial market policy-makers, regulators and participants as well as service providers, academics, NGOs and others.

The workshop coincided with the release of an Intergovernmental Panel on Climate Change special report on the impacts of global warming of 1.5°C above pre-industrial levels and related emissions and system transition pathways, which underscored the imperative, and urgency, of scaled-up action on mitigation and adaptation and the need for transformational change.

New Zealand Prime Minister Jacinda Adern has described climate change as the “nuclear free moment” of this generation. Consistent with the country’s international commitments, the Government seeks to put New Zealand on a pathway to a low-carbon future - aiming to reduce emissions to net zero by 2050 - and to facilitate a timely, managed and just transition as part of a broader sustainability agenda.

There is a reinvigorated programme of work across government, in tandem with strong private sector leadership on the issue. Financial market policy and regulation – historically neglected in climate policy frameworks – has the potential to have a powerful catalytic effect, along with increased and more innovative public finance.

Economic transformation will require financial system transformation, and a major redirection of public and private capital over a relatively short period of time. Workshop participants were reminded of the estimated scale of additional investment needed globally to meet the Paris Agreement goals, and corresponding scale of the investment opportunity that presents.

Currently, financial markets in New Zealand – and globally - are largely misaligned with climate change imperatives. There is a capital misallocation, due to issues ranging from market short-termism, asset mispricing, lack of information and awareness across financial markets and a number of other systemic barriers.

This IGCC briefing paper:

• Summarises the relevant New Zealand policy, regulatory and market landscape, with case study examples of local ‘climate finance’ activity (Part 1).
• Captures the key issues, insights and ideas that emerged from the workshop presentations and discussion of the challenges that investors are experiencing, drawing upon this to suggest key barriers and enablers, as well as potential practical solutions (Part 2).
• Provides some broad recommendations on follow-up government and market action (Part 2).

It does not seek to represent a complete state-of-the-market assessment or barrier/gap analysis. Rather, it gives a flavour of the current landscape and an indication of priority areas for focus.