Double standards on climate risks – Government protects sophisticated investors, not taxpayers

In Australia, corporations and their directors are facing increased scrutiny over investments with links to climate change as regulators clamp down on financial risks.

Yet government agencies putting taxpayer dollars on the line are immune. It is a blatant double standard.

The result is regulators protecting private investors from financial risk, while politicians and senior government officials can bet unlimited taxpayer funds on the Paris Agreement failing.

For the private sector, the benchmark for assessing investments is whether money goes to a world that holds global warming to well below 2°C. APRA has effectively demanded this since February 2017.

ASIC, the company regulator, is now demanding detailed disclosure of climate change risks.

It unequivocally agrees that company directors have legal obligations when it comes to climate risk. ASIC states there is no legal impediment to analysing business in accordance with a 2°C world. The regulator is pushing for greater consideration of non-financial risks.

These developments are very welcome. But they are limited in scope. They aim to protect shareholders and sophisticated investors. Not taxpayers, like you and me.

However, Aussie taxpayers are staring down the barrel of huge financial losses as a result of climate change risks.

The Australian government has a range of financial service providers. They can lend big dollars to risky projects. NAIF, an infrastructure fund for Northern Australia projects, has $5 billion to lend.

EFIC, an export credit agency, can be directed by Trade Minister Steven Ciobo to lend unlimited amounts to projects, here and overseas. No limits.

EFIC and NAIF have been in discussions with Adani about its Carmichael coal mine for years. The International Energy Agency, a conservative business-led analyst outfit, and the former UNFCCC secretary, Christina Figueres, both say Adani’s project in the Galilee Basin is not viable under a 2°C scenario.

Incredibly, Trade Minister Steve Ciobo has not been prepared to guarantee that EFIC will not fund Adani.

Perhaps more incredibly, there is no requirement that EFIC or NAIF only finance projects that are compatible with keeping global warming below two degrees.

It is inconceivable that the Federal Government will not be prepared to protect Australian taxpayers from financial risk caused by climate change.

It has so far been impossible to find out how climate change risks are being assessed.

When Environmental Justice Australia asked APRA to speak to NAIF about climate risk, APRA said it was beyond its jurisdiction. When we asked NAIF what climate change scenario it used to assess a Western Australian port expansion to service the fossil fuel industry, we did not receive a response.

When we asked EFIC to publish its board’s assessment of its decision to finance a company in Adani’s supply chain, as directed by the Trade Minister, it refused to do so. 

The lack of public accountability is astonishing, so we have asked the Commonwealth Ombudsman to investigate.

EFIC now says the Adani-related proposal is not proceeding. But nobody is prepared to say why, and nobody knows what standards this secretive agency uses to assess projects.

Beyond the financial risks taxpayers can bear in relation to climate change, many think it is outrageous the government is not doing all it can to protect citizens from the physical impacts of climate change. According to the Paris Agreement, those impacts become dangerous to human health if warming is not limited to well below 2°C.

By the Federal Government continuing to allow loose governance of government financiers, taxpayers’ money is put at risk.

Meanwhile the government is clamping down on companies to protect private investors. Is it fair investors are protected, when taxpayers are not?

The failure to standardise the approach is a failure of governance at the highest level. It flies in the face of legislation brought in by the Liberal government in 2013 that harmonised the obligations of government officials with company directors. Those company directors are under scrutiny for climate change risks by APRA and ASIC.

Meanwhile government officials are left without guidance or oversight.

This means while Australian banks and other financial institutions have woken up to the risks, taxpayer financing of Adani remains a real possibility.