Sustainable finance suppliers face barriers

The report shares insights from major capital providers, lenders, and influencers in New Zealand’s sustainable finance market, with over half (53%) of those surveyed saying they faced barriers when allocating or receiving sustainable capital.

KPMG | Toitū Tahua Report - Mobilising Capital for Impact

Sustainable finance covers financial products and services designed to enable organisations to invest in sustainability activities and projects. Examples are green, sustainable and social bonds, and sustainability-linked loans that offer lower interest rates for achieving agreed environmental and/or social targets.

The report reveals that almost two-thirds of sustainable finance professionals surveyed (65%) have seen examples of greenwashing in New Zealand. It welcomes the rise in green and sustainable financial products as a move towards the scale required to finance our transition to a low-emissions economy, but points out that misleading claims can mask the extent of the work needed to direct enough capital to environmental and social outcomes in the time required to adequately limit temperature rise and address climate impacts.

Alton Pollard, Sustainable Finance Lead at KPMG, says this will be a significant barrier to New Zealand achieving its 2050 targets: “The financial system is the engine of our economy – it decides where capital should or shouldn’t be directed. At the moment, the system is not yet adequately mobilising capital towards projects or areas that will support a sustainable, resilient and equitable New Zealand.”

The report also supports calls for a local definitional tool or taxonomy to provide definitions of sustainable activities in New Zealand, as seen in a number of offshore jurisdictions. It suggests the creation of an expert technical working group to adapt international methodologies for New Zealand’s specific requirements.

David Woods from Toitū Tahua: Centre for Sustainable Finance says, “The Climate Change Commission estimates New Zealand alone will need $34 billion of new capital in the next 13 years to finance our transition, and this number is only likely to rise. The opportunities to evolve our financial system to make a genuine difference are enormous.

“The cost of inaction is getting clearer by the day. Capital, talent and customers are increasingly gravitating towards ventures and businesses that are part of the solution, not part of the problem. The greater the constraints on supply of capital, the smarter we will need to be about accessing it globally. With the right settings and frameworks, the private sector is readying itself to get capital flowing where it’s needed. The opportunities are enormous and the change is inevitable, now it’s down to how quickly we can mobilise and align with international shifts.”

The new report builds on the Roadmap for Action published by the Sustainable Finance Forum, specifically on the issue of ‘Financing the transformation’.

KPMG is the Official Advisory Partner of Chapter Zero NZ. 

Toitū Tahua is a Chapter Zero NZ Working Group collaborator.