The global financial landscape has seen a rapid transformation in the last decade, driven by a growing emphasis on environmental sustainability. In this new era, institutions, businesses, and individuals are increasingly recognising the rewards from integrating environmental, social, and governance (ESG) factors into their investment decisions.
This commitment is clear even as external conditions weigh on broader market activity. Global green, social, sustainability and sustainability-linked (GSSS) loan and bond issuance totalled $US338.4 billion in the first quarter 2023. Issuance volume recorded only a small decline of 1 per cent quarter-on-quarter compared to the fourth quarter of 2022, driven by the bounce back in fixed income markets.
The total global GSSS market now exceeds $US6.15 trillion and is on track to be worth more than $US50 trillion by 2025, according to Bloomberg.
Sustainable finance is a key way companies can meet their net zero goals. As a result, what was once a question of ‘why should we engage in sustainable finance?’ has now transformed into ‘how can we implement a sustainable finance strategy?’.
When transition really happens
At ANZ, our conversations with customers now look to answer questions like ‘is our business ready for it?’, ‘is our sustainability strategy ambitious enough?’, or ‘what kind of investor diversification am I going to get?’.
Another increasingly common question is ‘will this improve our access to capital?’.
The answer to that is very clear. Access to capital has become a key driver in sustainable finance. Corporate treasurers in Australia, and indeed the Asia-Pacific region, are beginning to understand the strong connection between a sustainability strategy and access to capital, as well as its role in helping them deal with risk mitigation, compliance with existing and future regulations.
This success of the transition to net zero relies on the crucial combination of willpower and access to the necessary means. That's where ANZ can support customers across the Asia-Pacific region. It is important we have targets to drive activity and impact, but also the financial means to support energy transition plans.
Where to from here?
The key drivers for sustainable finance issuance in the short to medium term are likely to be broad. How policy and regulatory initiatives develop will be critical, as will the development of updated market principles, guidance, and disclosure frameworks.
The latter, in particular, will provide important further clarity and broader scope for sustainable finance, for example in the areas of biodiversity and natural capital. In addition, continued innovation in sustainable-finance instruments will help borrowers achieve their sustainability goals.
ANZ is playing a key role in the shift supporting its customers in their transition to a low-carbon and more sustainable economy by encouraging them to identify climate risks and opportunities, create or further strengthen existing transition plans and report publicly on their progress.
The bank has set a target to fund and facilitate at least $A100 billion by September 30, 2030 towards improving social and environmental outcomes for its customers and direct investments.
This includes initiatives to help lower carbon emissions, protect nature and biodiversity, increase access to affordable housing and promote financial wellbeing. If achieved, this would bring the bank’s total commitment to $A166 billion dollars since October 2015.
More broadly, ANZ is supporting an economy-wide transition to net zero because it's our opportunity to shape a sustainable future for generations to come.
Shayne Elliott, Chief Executive Officer, ANZ and Katharine Tapley, Head of Sustainable Finance, ANZ.
This article has been adapted from a LinkedIn live discussion.
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