Unpacking the 2023-24 Federal Budget
The 2023-24 federal budget, announced by Treasurer Jim Chalmers on Tuesday, delivered a lot to digest on sustainable finance. This blog unpacks the announcements to give you the highlights (roses), lowlights (thorns), and opportunities (rosebuds) for accelerating sustainable finance in Australia and the region.
Roses
Sustainable finance agenda
No surprises here but welcome confirmation of funding for key planks of the Government’s Sustainable Finance Agenda (announced by the Treasurer at his Investor Roundtable on 21 April):
$8.3m over 4 years (and $1.3m per year ongoing) for the Australian Office of Financial Management to develop a sovereign green bonds program, with the first issuance set for mid 2024. At the Australian Council of Superannuation Investors conference last week, Assistant Treasurer Stephen Jones described this as Australia “turning up and entering the market, with the capital and the clout of Government, and our Triple A credit rating.” ASFI welcomes this announcement as a demonstration of the Government’s commitment to supporting the growth and integrity of green capital markets in Australia.
$1.6m for ASFI to lead the initial phase of an Australian sustainable finance taxonomy. This funding will establish the governance structure for the taxonomy development phase, develop screening criteria for climate mitigation for three sectors and undertake workstreams on useability and data, “do no significant harm”, and minimum social safeguards. It will also support ASFI’s work to continue to build strong international partnerships to ensure inter-operability of taxonomy frameworks globally. This is a strong example of Government-industry collaboration and ASFI is focussed now on laying the ground for work to commence from 1 July. More information is available on our website.
$4.3m for ASIC enforcement action on greenwashing. Speaking at the Responsible Investment Association of Australasia conference yesterday, ASIC deputy chair Karen Chester announced the release of ASIC’s report on recent greenwashing interventions. She dismissed suggestions that ASIC is getting too far ahead of standards development, saying that incremental stepping up of ASIC enforcement is consistent with and necessary for supporting the growth of sustainable finance and investment in Australia.
The Government’s position paper on its Climate Disclosure Framework is due out in June. And the draft Sustainable Finance Strategy is expected in July.
Residential energy
The budget was a giant step forward for decarbonising residential buildings and lowering energy bills for households:
$1bn for the Clean Energy Finance Corporation to support affordable finance for home upgrades. The CEFC has already helped catalyse the green home loans market for new builds. It is now resourced to tackle the challenge of home retrofits. Importantly, this funding tranche will have a lower return requirement allowing more flexibility for CEFC in its approach to building this nascent market.
$300m to upgrade social and public housing in partnership with the states and territories – a really important step to lower energy bills for some of the most vulnerable people in our community. This investment, along with $310m in tax breaks for small business energy efficiency, will help build the service delivery eco-system for the broader market. ASFI now wants to see state governments come to the table and introduce mandatory disclosure of energy performance for homes, and minimum standards for rental dwellings.
Less sexy, but just as important, is funding to expand the NatHERS home energy rating framework to apply to existing homes, and expand the Greenhouse and Energy Minimum Standards Program to more appliances. Minimum standards and energy ratings are proven, cost-effective policies. These reforms, along with mandatory disclosure of energy performance, will help underpin the development of financial products in this space.
Industrial decarbonisation
In this sector we see the beginnings of an Australian response to the Inflation Reduction Act, including a $2bn Hydrogen Head Start program to provide revenue support for investment in renewable hydrogen through competitive production contracts. There is also $5.6m funding for an analysis of Australia’s clean energy competitiveness, with actions to be identified before the end of 2023 to further catalyse clean energy industries, ensure Australian manufacturing competitiveness, and attract capital investment.
There was $1.25bn for industrial decarbonisation through the Powering the Regions Fund, and an undisclosed allocation for the Capacity Investment Scheme to support government investment in firmed renewables and storage. ASFI was pleased to see $18.1m allocated to implement priority reforms from the Chubb Review recommendations to support integrity of Australian Carbon Credit Units.
Net Zero Transition Authority
The budget confirmed $83.2m over 4 years to establish a national Net Zero Authority, whose mandate explicitly recognises the critical role of private capital in supporting orderly and positive economic transformation in regional areas. A great step forward in the acceleration and equity of Australia’s transition. ASFI looks forward to working with the Australian Government to make this Authority as effective and impactful as possible.
Thorns
Environment measures
It is fair to say that despite some lofty goals (including an end to species extinction, and the protection of 30 per cent of land and 30 per cent of oceans by 2030), environmental reform in Australia is lagging behind climate reform. ASFI welcomes $121m over four years to establish a national Environment Protection Agency, and $51m for Environment Information Australia – promised to be a new authoritative source of high-quality environmental information. However, there were expectations of funding to support implementation of commitments made as part of the Kunming-Montreal Global Biodiversity Framework, which didn’t come through in this budget. ASFI is committed to working with members, partners and the Government to accelerate the integration of nature considerations into financial decision making and unlock the implementation challenges of nature-related disclosure and reporting.
Rosebuds
Social impact investment
The budget includes measures to support the investment ecosystem for social enterprises, including $100m Social Impact Investment Outcomes Fund and $11.6m for Social Enterprise Development. But the Government could and should be bolder in its support for social impact investing - building on the $2bn increase to NHFIC to harness private capital to support broader social impact in Australia. ASFI hopes to see the Government proceed with the establishment of a social impact wholesale vehicle in line with the Michael Trail chaired Social Impact Investment Taskforce’s recommendations, and in close collaboration with the finance and investment community. We look forward to working with our members and the Treasurer through the Investor Roundtable to take forward discussions on unlocking private capital to support social impact investing initiatives.
Investing in our region
Expansion of DFAT’s Emerging Markets Impact Investment Fund from $40m to $250m is a welcome step in line with ASFI’s recommendations to the Government’s Development Finance Review. The expanded EMIIF will focus on investments into SME funds that support climate and gender outcomes in South and Southeast Asia and the Pacific. We look forward to the results of the Development Finance Review – which should establish a dedicated Australian development finance capability that can support Australian financial institutions to access high impact opportunities in emerging markets.
Wellbeing framework
In its October budget, the Government committed to producing a new, stand-alone “Measuring What Matters” statement in 2023 to show how Australia is tracking across a broader range of social and environmental indicators that speak more directly to wellbeing. Treasury consultation on this framework is now open, closing 26 May and ASFI looks forward to the outcomes. We welcome the inclusion in this Budget of an expanded Women’s Budget Statement, and the Government’s intention to do gender impact assessment across all budget measures from MYEFO 2023.