There are more fault lines emerging in the coalition, once again over climate change.
Public consultation closed a week ago on a proposal for a “Sustainable Finance Taxonomy.”
Simply, it is described as a classification system which labels and establishes credible criteria for economic activities based on their contributions to meeting environmental goals.
In effect it would develop a rule book to define what would qualify as a green investment.
But last week Britain dropped its proposal to do the same thing after a consultation there showed more than half the respondents were opposed.
Announcing the proposal back in March, Climate Change Minister Simon Watts said it was crucial in today’s world as it would provide a clear classification system to identify economic activities and assets aligned with a sustainable, low-emissions future.
But a week ago, Federated Farmers wrote to Ministers claiming the proposal would create major risks for New Zealand’s agricultural sector and urged the Government to halt the process entirely.
The right-wing rural populist movement, Groundswell, is even more outspoken.
Its environment spokesperson Jamie McFadden says the Taxonomy is “the scariest thing I have seen yet,” warning it could lead to farms being effectively shut down.
The proposals have been in the Government system since September last year, when Watts unveiled the idea at the Responsible Investment Association Australasia (RIAA) conference.
“Global expectations from consumers and trading partners are changing rapidly, and it’s essential New Zealand must adapt to these changes to be competitive on the world stage,” he said.
“Once completed, the strategy will provide the necessary clarity for financing and investments, helping New Zealand align with global sustainability trends. This alignment will not only attract investment but also increase jobs and drive economic growth locally.”
He said the Government would partner with the Centre for Sustainable Finance to develop the strategy.
The Centre includes all the major banks along with some major law and accounting firms as its partners.
On its website, it says a Sustainable Finance Taxonomy would start with the priority sectors of agriculture and forestry.
“A sustainable finance taxonomy is a standardised framework for classifying economic activities according to their environmental performance,” it says.
“This classification system provides investors with the confidence to identify and invest in green and transition activities.
“Developing a robust taxonomy framework, aligned with those already in place in our trading partners’ economies, will help to attract more international capital into Aotearoa New Zealand.”
But both New Zealand First and ACT already have Private Members’ Bills proposed, which would limit the ability of Banks to consider a customer’s response to climate change as a determinant in deciding whether to make the loan.
The likelihood that either party will support this is remote.
ACT MP Mark Cameron was delegated the task of making a response to POLITIK on the proposal.
He said: “As part of the Government, ACT supports all Government policies, even if we did not push them ourselves.
“However, ACT would strongly oppose making a scheme like this compulsory.
“There is already far too much red tape on business.
“People already face enough ETS costs as it is; they don’t need some bureaucrat telling them to avoid costs.
“An easier option would be to avoid the cost of the bureaucrat by liberating them to the private sector, where they could make a living by providing value to others, like people in the primary industries.”
That hardly sounds like approval. A New Zealand First source said the party had not discussed the matter, but given that it had proposed a private members’ bill that would prohibit banks from “debanking” an organisation based on environmental or social concerns, it would seem unlikely it would support the taxonomy.
Federated Farmers banking spokesperson, Mark Hooper, said that, among other things, the proposed taxonomy defined green farming as producing less than one tonne of CO₂ equivalent per hectare per year.
“This threshold is so low that no working New Zealand farm could realistically qualify, even though we’re home to the most emissions-efficient food producers in the world,” he said.
“It sends a message that no farm is green, regardless of how well it’s managed or how efficient it is.”
He said Federated Farmers supported the intent of two Members’ Bills currently before Parliament, introduced by Andy Foster MP and Mark Cameron MP, which aim to prevent financial institutions from making lending decisions based on ideology or reputational risk.
“The taxonomy, in its current form, directly undermines that intent,” he said.
“This is not a path to sustainable finance. “It is ideologically driven, practically unworkable, and risks serious harm to rural New Zealand.”
The idea of a Sustainable Finance Taxonomy has attracted widespread support internationally.
Two of New Zealand’s major trading partners, the European Union and Australia, are introducing one.
An explainer on the proposal from law firm Russell McVeagh says a Taxonomy has the potential to reduce market uncertainty about the circumstances in which particular labels may be attached to particular financial products.
“This could reduce both the risk of organisations describing financial products in a way that is accused of being misleading (greenwashing) and the risk of organisations staying silent on sustainability-related matters to avoid being accused of making misleading statements (greenhushing),” it says.
“In turn, this could allow the development of new financial products, such as KiwiSaver products that align (and can be marketed as aligning) with Taxonomy criteria.”
In a statement earlier this year, Watts said the initiative was an important step towards helping investors, businesses, and market participants enhance confidence and reduce uncertainty in “green” financial products.
“Mobilising private capital that enables implementation of emission reduction projects is a priority for this Government,” he said.
By leveraging the expertise and insights of industry leaders, the Independent Technical Advisory Group (ITAG) tasked with preparing and publishing independent non-binding advice on the design of a “green” (sustainable finance) taxonomy rulebook would play a pivotal role in shaping policies and frameworks that promote environmental sustainability while driving economic growth.
“New Zealand is following in the footsteps of Australia, which recently introduced a similar industry-led process. This demonstrates a collective effort among nations to address climate change challenges and transition towards a more sustainable financial ecosystem,” he said.
Federated Farmers’ response to this is a Facebook post simply saying, “Could your farm be denied a loan for not being green enough?”
If there is an issue that fundamentally divides the coalition, it is becoming clearer and clearer that it is climate change.
The Ipsos New Zealand issues monitor survey showed that 15 per cent of the electorate said climate change was the most important issue facing the country.
That was more than those who nominated education, transport, race relations or taxation as the most important issue.
It leaves National with a dilemma; does it maintain coalition unity by backing off climate change moves like the taxonomy, or does it press ahead, possibly needing to seek Labour support for any legislation that might be required.
