Across all sectors, organisations are coming to grips with the scale and pace of transformation required to achieve the goals of the Paris Agreement and keep global warming well below 2°C and pursuing efforts to limit it to 1.5°C.
Decarbonisation is an enormous, system-wide challenge that provides a once-in-a-generation commercial opportunity for those who choose to lead – but will require rapid and transformational change to capture.
While Australia’s transition to a net zero economy seems inevitable, the investment community – shareholders, wealth funds and banks – will help set the pace of change and play a critical role by raising and directing capital to support this transition.
Australia’s climate challenge
Australia is behind in its journey to decarbonise. Rapid change is required to play our role in limiting the impacts of climate change.
The green banking opportunity in numbers
Australia will need to attract and invest close to $1.5 trillion by 2030 and $7 trillion by 2050 across high-emitting sectors like energy, industrials, mobility, manufacturing and agriculture.
Agriculture
17%
of Australia’s greenhouse gas emissions
$30bn
needed to improve Agriculture framing practices, technology and carbon sequestration to abate emissions by 2030
80%
share of lending currently provided by Australian banks
Commercial Real Estate
10%
of Australia’s greenhouse gas emissions
$105bn
opportunity for green refinance, including $9 billion for retrofit costs up to 2030
80%
of buildings will need to be retrofitted across Australia by 2050
Energy
32%
of Australia’s greenhouse gas emissions
>$100bn
needed to finance new renewable energy generation by 2030
$2-3bn
worth of fossil fuel electricity generation assets at risk by 2030
Rewiring the bank for transition finance readiness
To compete in both the green and transition financing markets in the decade ahead, Australian banks will need to undergo an accelerated, enterprise-wide ‘rewiring’ of systems and processes in five key areas:
Products and services
Focus on broadening product offering and access to risk management instruments.
- transition product offerings and new revenue streams: ‘ACCUs at the bowser’, ‘transaction banking 2.0’
- carbon markets access for offsets and risk management
- value add services: emissions calculators and carbon accounting/treasury management solutions.
Risk management
Focus on portfolio analytics and finance decision support.
- portfolio analytics ‘cube’ to consider risk management and decisioning from multiple dimensions using same data sources
- new customer segmentation models based on a dynamic understanding of risk, internal and external signals
- commercial risk decisioning aligned to carbon-budget and glide path guide rails.
Leadership and incentivisation
Driving the right behaviours throughout the business.
- robust, science-based foundations and insights for Board and C-Suite to inform decision-making and foresight
- identify and surround strategically and commercially attractive, but hard-to-abate sectors, not just renewables
- clear incentivisation of Executive Management transition behaviours.
Technology and data
Clarify data strategy and data management frameworks.
- manage internal data sources, external data providers and proxies in a systematised manner
- plug and play increasing accuracy of data inputs from market and reference data platforms
- integrate emissions capture and product eligibility criteria into CRM and CLM platforms.
People and customer capability
Educating staff throughout the business and improving customer conversations.
- improve customer awareness, portfolio/risk management tooling (‘Aladdin for transition’)
- aligned metrics and capabilities to balance risk vs reward empowered frontline
- strategic workforce uplift to embed new capabilities and practices.
Be a first mover in transition finance
What if there was a way to stay in front of evolving regulations, opportunities and best practices and take advantage of commercial opportunities as the economy transitions to net zero? Download our report to find out more.
How KPMG can help
KPMG works shoulder-to-shoulder with leading banks across the globe – and the corporates they serve – to devise and execute plans to enable the transition financing capabilities needed to support decarbonisation.
With a global network of specialists in climate change, decarbonisation and net zero transition, as well as deep expertise in business operations, technology, policy and industry sectors, we are uniquely positioned to bring together the experience and expertise needed to embed sustainability into an organisation’s core business strategy and deliver on its transformation goals at speed.
