The world has acknowledged the enormity of the climate emergency. Financial markets are moving in response at a rapid pace. Yet this inquiry, established by members of the climate-denying faction of the LNP, was a barely concealed PR campaign for the fossil fuel industry.
The central premise of this inquiry was that regulators and banks are not making a rational assessment of the threat posed by the climate emergency, and are instead succumbing to “the influence of activist pressure”. Apparently, those whose job it is to assess risk by the trillions have all got it wrong.
By blaming financial regulators and financial institutions, the Morrison-Joyce Government is providing cover for the fossil fuel industry and their continued profiteering from cooking the planet.
This inquiry confirms that the National Party is no longer the party of farmers, but the party of mining.
Their refusal to be honest about the climate emergency, and their delaying of the transition away from fossil fuel, is failing regional communities and increasing the scale of the challenge that these communities face.
Most government members of this committee know that this inquiry was a farce. But their need to appease their donor base keeps cutting across any sense they might have.
The end result is a committee report that is an incoherent mess and that treats regional Australia for fools.
The terms of reference of this inquiry refer to the consequential impacts of prudential regulation on “law-abiding businesses connected to Australia's export industries”. It is telling that the bulk of evidence canvassed in the majority report comes from fossil fuel companies that have a track-record of breaking Australian laws, such as Adani Group, New Hope Coal, Centennial Coal, Whitehaven Coal, as noted by Market Forces (Submission 61, p1).
Some of the recommendations in the majority report are utterly facile. For example:
Recommendation 2: The Committee recommends that the Australian Government recognise that finance, banking and insurance services are essential services for businesses.
It’s safe to say that this is a given. If further assurance is needed, see: Sections 51 (xiii) and (xiv) of the Constitution.
Throughout this inquiry some committee members attempted to blame so-called “activists” for the withdrawal of finance from the fossil fuel industry, ignoring the fact that the global transition to net zero is already underway whether the Morrison Government likes it or not.
Recommendation 7: The Committee recommends that the Department of the Treasury conduct a review into extent of the influence of activist pressure on the decisions of financial institutions in relation to the resources industry, and if necessary develop options to address this issue.
This ignores the fact that the greatest driver of demand for Australian fossil fuels will come from global markets and trading partners, which are already divesting from coal.
For example, Mr Nathan Parkin, Investment Director, Ethical Partners Funds Management provided evidence to the committee that: “the consideration of the financial risks of ESG in investments is not a minority activist approach; instead it is a global investor response that includes the biggest investors in almost all countries globally.” (Mr Parkin, Committee Hansard p9, 28 July 2021).
Mr Tom Arup, Director, Strategic Programs, Investor Group on Climate Change also noted: “Australia's economy is heavily connected to and reliant on international capital markets. It is therefore critical to recognize that the investor response to climate risk is not just the result of what is happening within our borders and is being heavily driven by rapid shifts in most major global markets we're exposed to, including North America, Europe and Asia.” (Mr Arup, Committee Hansard, p19, 28 July 2021)
Some recommendations present serious legal risk for the industry. For example:
Recommendation 3: The Committee recommends that the Australian Government take steps to ensure that banks must, at a minimum, provide transactional banking services to all law-abiding businesses.
Placing limitations on a bank's ability to undertake risk management conflicts with fiduciary duty (ACCR Submission 22 p8) and compromises duties to shareholders and members (ACCR Submission 22 p11). If banks fail to consider, disclose and manage climate risks, this presents legal risks for trustees, directors and companies (Market Forces Submission 61 p4).
As summarised by the Centre for Policy Development: “The legal foundations for boards, businesses, and investors to understand climate risks are very clear, and the consequences of failing to properly identify, manage and disclose the financial impacts of climate are stark.” (Submission 31 p1).
Other recommendations are oxymoronic. For example:
Recommendation 6: The Committee recommends that the Australian Government work with the resources sector to create a self-funding insurance model that meets the needs of resource companies, contractors, suppliers and associated export infrastructure.
The whole concept of insurance is to pool risk. To suggest that an industry can deal with a systemic risk (climate change) by self-insuring is tantamount to saying a homeowner can save money by insuring themselves. It is completely illogical. Which suggests that this recommendation is seeding the idea that the government should underwrite a mutual insurance scheme. At which point it’s no longer self-insurance, but state-subsidised capitalism.
Other recommendations are simply baffling. For example:
Recommendation 4: The Committee recommends that the Australian Government direct the banks to prepare a regulatory impact statement (or similar) that outlines the real impacts of a policy setting – particularly on regional Australia – such as job losses and economic impacts, and detailing industry feedback received and consultation undertaken, before withdrawing funding from any export project.
Which seems to be saying that the same banks and insurers who, apparently, are not acting rationally and who are overpricing carbon risk should make an assessment of whether they are acting rationally and properly pricing carbon risk, as if they haven’t done that already. Recommending they should do this by writing a Regulatory Impact Statement, seems to suggest that these same banks and insurers that, apparently, aren’t acting rationally, should write their own laws.
Finally, other recommendations highlight just how contorted the Morrison Government has become in trying to appease its climate-denying factions while at the same time no longer being able to afford to deny the global shift. The final recommendation is:
Recommendation 13: The Committee recommends that the Australian Government identify and invest in opportunities for Australia’s exports as part of the global transition towards a net zero economy.
So, at the end of an inquiry that tried to undermine the financial case for a shift to a net zero economy, the conclusion is that we should take advantage of the financial opportunities of a net zero economy.
The Australian Greens strongly oppose the use of this inquiry to deny and delay the global transition to a net zero economy.