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InterContinental Hotel, Sydney, Australia
16 July 2009
Donald, [DONALD MACDONALD, PRI CHAIR] thank you for your welcome and introduction.
I am delighted representing the Prime Minister and Senator Nick Sherry today to open this conference and would like to begin by acknowledging the Gadigal People of the Eora nation, on whose land we stand.
What a difference three years makes. After all, the UN Principles for Responsible Investment were only launched in 2006. And yet this important global initiative is now a mainstream, positive force for change in the global investment industry.
The PRI presence in our markets is growing at an astonishing rate. The number of signatories to the PRI in the last three years has grown from just 50 members to more than 560. Over this period, their total assets under management have increased four-and-a-half times.
In Australia alone, there are 87 signatories representing more than $US500 billion in assets. Approximately 40 per cent of our funds under management have signed up to the PRI, making Australia the best represented country in the world for PRI signatories. This is a phenomenal achievement.
Those of you who have committed to the PRI are leading the way in responsible investment - nationally and internationally - influencing decision-making and ownership practices to integrate environmental, social and governance issues.
Critically, institutional investors are seeing the PRI framework as part of their response to the current crisis, and improving their research and other capabilities to encompass environmental, social and governance issues. And governments and market authorities are seeing PRI as an intrinsic part of the recovery process.
The Responsible Investment Association describes Australia as a global leader in responsible investment. We're already providing real support to it, we are at the forefront of the debate, and I agree with the Association that we have an opportunity to become a global model and hub for progressive investment.
Whilst much of this push can be credited to sheer necessity, and our early awareness of the climate change challenge, simply living on the driest continent with significant exposure to drought has heightened our interest in innovation, particularly when it comes to managing risks. From this point on, it is essential that our corporations, superannuation funds and managed funds are giving due regard to the impacts of climate change, water scarcity and energy security issues.
As we learn more about pricing these risks and identifying hidden opportunities, this translates into a greater capacity to improve the sustainability, efficiency and governance of our financial market system evolves. In today's climate, responsible investors - those who choose to integrate environmental, social and governance issues into portfolio management - have a critical role to play.
The driver to become a responsible investor may be maximising financial returns, acting in accordance with personal ethics, furthering societal goals - or as is increasingly being seen, a combination of all three. Of course, the financial crisis brought to light the failure of many investors, corporations and governments. It demonstrated the tendency of investors to overlook important issues that can reduce systemic risks, as they focussed on short-term returns.
Now responsible investment requires a broader suite of information to be considered, for the obvious reason that investors benefit from a more comprehensive understanding of systemic risk and what drives long-term returns. It's partly to address these needs that Senator Sherry and I have both supported the Responsible Investment Academy and its training programs.
The Australian community is increasingly demanding that environmental, social and governance issues are sufficiently considered in investment decisions. We are becoming more aware of the real and immediate consequences that flow from each investment decision.
While support for responsible investment in Australia is growing, up to now many institutional investors have not had the capacity to integrate environmental, social and governance factors into their investment processes.
As these investors work towards developing their internal capabilities, the question was raised about establishing an appropriate education and training program to help investors implement the Principles of Responsible Investment.
I saw value in such a proposal, and last year provided funding to develop a business plan for a Responsible Investment Academy through my Department's Education for Sustainability Grants program. Then early this year Minister Sherry announced that the Rudd Government would provide $2.5 million over three years to establish the Responsible Investment Academy.
The Academy is the world's first academic-level centre for responsible investment education, training and innovation, working to a Responsible Investment Academic Advisory Council with representatives across the sector, including NGO and religious sector representatives. Importantly, its services will be offered to a global audience, delivered through new technology.
The Academy is putting together, and carefully testing, a training program for investment professionals to develop vital skills that will help Australian businesses maintain and sustain both their own financial health and that of the large-scale economy - effectively, holistically and responsibly. It is concerned with addressing four weaknesses that have been identified in our financial market system:
I think it's worth pausing to reflect on the significance of the Responsible Investment Academy, and the Government's support for it. Ten or twenty years ago it would have been hard to imagine an Environment Minister and an Assistant Treasurer supporting such an organisation - and each seeing strong benefits for their portfolios. It's a sign of that mainstreaming of responsible investment that I mentioned earlier - and it's a new direction I find enormously exciting.
The Australian Government understands the critical relationship between ensuring a sustainable environment and achieving long-term sustainable investment returns. In May, speaking to the National Business Leaders Forum on Sustainable Development on "how we can turn risks into sustainable business opportunities", I highlighted to the forum that the guiding principle for this Government, as we work towards a low-pollution, sustainable economy, is not to trade off the environment for the economy, but to secure both.
I want to mention a few examples of where our programs - in the areas of climate change and energy efficiency and broader environmental management - provide Government leadership that supports responsible investment.
One example which directly drives investment is the Government's commitment to increase the renewable energy target to 20 per cent by 2020. The industry's own estimates project the expanded RET will inject some $20 billion into the market for renewable energy in the years ahead.
This investment will be reinforced by the Government's $4.5 billion Clean Energy Initiative, which includes $1.365 billion for the Solar Flagships Program. Solar Flagships aims to create an additional 1,000 megawatts of solar generation capacity, positioning Australia as a world-leader in large-scale solar technologies.
According to recent analysis from the Climate Institute, more than 26,000 jobs will be created if all planned and committed clean energy projects go ahead - projects that will be driven by market-transforming measures like the expanded Renewable Energy Target and the Carbon Pollution Reduction Scheme.
Through my portfolio, we are delivering the $4 billion Energy Efficient Homes Package, the most far-reaching energy efficiency measure this country has ever seen. Energy Efficient Homes is rolling out insulation or solar hot water for some three million Australian households, with multiplier effects rippling through the Australian economy, supporting jobs in manufacturing, distribution and installation.
Just last month I opened Bradford Insulation's new factory in Brisbane, and saw first-hand how new jobs have been created, with production going 24/7, and demand for insulation - quite literally - going through the roof. The Government has also moved quickly to develop a nationally accredited training course for insulation installers that is being rolled out across Australia. This course did not exist before - it brings new options for job seekers and a new level of training and accreditation that has been welcomed by the insulation industry.
This is a great example of an investment that is maximised in every sense - supporting jobs and driving new training opportunities now, while lowering household energy bills and increasing comfort levels for decades into the future. It is also expected to reduce greenhouse gas emissions by close to 50 million tonnes by 2020.
The Government's investment in the Energy Efficient Homes Package reflects the principle that we can both support jobs now and grow sustainable and profitable industries into the future. This principle is increasingly embraced in the commercial building sector, an area in which I have a very strong portfolio engagement.
In this sector, the Government is working to help transform the market, for example through the $90 million Green Building Fund, through increased minimum standards for energy efficiency and through the introduction of mandatory disclosure of energy use for large commercial office buildings, providing the market with clear information about energy efficiency at point of sale or lease.
Of course it helps when a sector has its own sustainability champions driving responsible investment, and that is very much the case, for example with the Green Building Council of Australia and the members of the Australian Sustainable Built Environment Council leading the way.
And with an eye very much on the future, the Government is investing up to $100 million in the National Energy Efficiency Initiative, a partnership to explore the potential of smart electricity grids to transform the way we use energy in our homes and businesses.
This is a very exciting frontier of energy efficiency policy, and I am confident it will soon be a very active frontier for investment, harnessing numerous benefits including reduced transmission losses, increased network reliability, better integration of renewable energy - and the opportunity to empower Australian homes and businesses in their everyday energy use.
We've also used the opportunity provided by the Global Financial Crisis to create sustainable jobs in other parts of the economy.
The Government's Jobs Fund is designed to support and create jobs and develop skills with projects that build community and social infrastructure. The benefits for local communities are significant: generating jobs, providing economic stimulus around the country and conserving our rich and unique heritage.
As part of the Government's $650 million Job Fund, $300 million is being allocated to support community infrastructure projects with a focus on the promotion of environmentallyfriendly technology and heritage. To give just one example of the multiple benefits that flow from this investment, on World Environment Day I was privileged to be in the Greater Blue Mountains World Heritage Area, just 100 kilometres west of here.
This is one of 17 World Heritage properties in Australia. As well as being globally significant in environmental and cultural terms, these places are economically significant on a national scale. A recent report into the economic activity in these properties found that they generate $12 billion annually and support over 120,000 jobs across the country.
The Blue Mountains World Heritage area is a prime example of these benefits. More than four million people visit the Blue Mountains each year, a major source of income that underpins the local economy. One of the most popular destinations is the Grand Canyon Walking Track that provides access to a magnificent sandstone canyon via historic stone pathways and steps.
With support of $1.3 million through the Jobs Fund, major restoration and upgrade work - the first known major work since it was constructed in 1907 - will happen. This means visitors will gain an enhanced experience and the local economy benefits with around 20 jobs supported through the project.
I wish you well in your discussions over the next couple of days. As I said earlier, I'm very excited by the work you're doing. I believe that the UN Principles for Responsible Investment will continue to expand their reach and influence because of the global financial crisis, not despite it.
Their value is being recognised in many different sectors, and that's because these Principles draw on the links between the economy, the environment and our society. These links are the evidence of the interconnectedness of an increasingly globalised world, with pressures and challenges aplenty - what better example for us than climate change. People are looking to better understand this interconnectedness, and in response, their looking for integrity and holistic thinking in the behaviour and approaches of corporations, governments and other institutions.
So your challenge is to turn the Principles into action and to bring integrity and holistic thinking into your approaches.
This is not just a case of signing up to the Principles. It's a case of integrating those principles into your investment decision making, being more transparent in reporting your decisions, and actively engaging on environment, social and governance issues both within your institutions and with others.
The future belongs to those who do take up that opportunity, and I know you'll be doing that at this conference.