Skip to Content
Global News Select

Australia Faces Rising Divestment Risk Without Action on Climate, Says RBA

By James Glynn

 

SYDNEY--Failure by Australia to fully recognize shifting appetite in global markets for government and corporate action on climate increasingly risks divestment by foreign firms and rising costs of capital in the future, the Reserve Bank of Australia said Thursday.

Guy Debelle, deputy governor of the Reserve Bank of Australia, said issues of climate and the cost of capital now regularly feature in conversations he has with foreign investors.

This is a marked change from a few years ago, he added.

Australian companies with an international investor base experience the same, as do the government debt agencies, Mr. Debelle said. Investors will adjust their portfolios in response to climate risks.

"To date, these discussions have not led to any obvious change in investor appetite for Australian bonds or equity, with only a few small exceptions," Mr. Debelle said. "But there is a risk we will see more of these divestment decisions sooner rather than later."

Governments in other jurisdictions are implementing net zero carbon emission policies. Both of these are effectively increasing the cost of emissions-intensive activities in Australia, he said.

"So, irrespective of whether we think these adjustments are appropriate or fair, they are happening and we need to take account of that," Mr. Debelle said.

"The material risk is that these forces are going to intensify from here."

Still, there are opportunities for Australia too, he said.

Australia is endowed with resources that have the potential for it to continue to be an exporter of energy -- but renewable rather than emissions-intensive fossil fuels.

 

Write to James Glynn at james.glynn@wsj.com

 

(END) Dow Jones Newswires

October 13, 2021 18:15 ET (22:15 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.