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Financial sector initiatives

The financial sector has a key role in achieving sustainability. Beyond its ability to take the types of actions available to all organisations, such as reducing waste, energy and water, and instituting green purchasing programs, its activities of lending, investing and insuring underpin nearly all other companies and thereby have the potential to influence their behaviour. The potential for exercising this influence to promote sustainability is being increasingly recognised by the financial sector in Australia, and many new initiatives are being taken. Examples of these include:

• socially responsible investment managed funds
• socially responsible superannuation funds
• individual portfolios invested using socially responsible criteria
• lending policies that take account of environmental and social issues
• green loans that reward sustainable choices
• green bank accounts
• community banking
• microcredit to provide very small loans, generally to low-income individuals, for self-employment projects that generate income, allowing them to care for themselves and their families.

Examples of Australian financial sector initiatives

Socially responsible investment (SRI) in Australia, which takes account of the environmental and social, as well as the financial, performance of companies, has grown very rapidly in the past several years. Socially responsible managed portfolios have grown from $325 million to $7.67 billion between 2000 and 2005 (Corporate Monitor 2005). Returns from SRI managed funds compare favourably with mainstream funds. Although SRI still represents a small share of overall investment in Australia and overseas, its rapid growth indicates an increasing interest by investors in reflecting their values in their investments. The Ethical Investment Association (EIA) is a membership organisation for professionals working in the area of SRI and it manages the world’s first certification program for providers of SRI products and services. Certified products and services are entitled to carry the SRI symbol (EIA 2005).

An example of a financial sector incentive provided to encourage environmentally beneficial action is the goGreen® car loan offered by Melbourne-based financial cooperative mecu Limited. The loan rewards members for purchasing environmentally efficient cars by charging different interest rates depending on the car purchased. The more efficient the car is, the lower the interest rate. In addition, mecu offsets the car’s greenhouse gas emissions for the life of the loan through partnership with Greenfleet to plant and maintain 17 native trees annually in the Murray-Darling Basin. Since the product was launched in September 2003, mecu has benefited from a 45% increase in car loans. In recognition of this financial initiative, mecu in 2005 won the Publishers National Environment Bureau Gold Banksia Award as well as the Banksia Award for Leadership in Financial Services and Sustainability (Banksia Environmental Foundation 2005).

VicSuper invests in direct property through ownership of units in the Direct Property Investment Fund, an unlisted trust managed by Colonial First State Property Limited. In 2002, it established an innovative partnership with Colonial First State Property to manage its properties using sustainability principles.

Westpac has been a leader in the financial sector in integrating sustainability across its operations. Its programs span a range of social responsibility issues. The environmental initiatives include management of their ecological footprint, measuring and reporting on performance and incorporating environmental considerations into the risk management framework. Westpac regards these and other actions in the area of social responsibility as an essential part of its activities and as a competitive advantage (Westpac 2005).

IAG is another company treating environmental stewardship as a competitive advantage and as part of their core business. It states on its website that ‘sustainability is neither a program nor an initiative, but simply good management. Our strategy is to embed sustainability in our existing business and organisational practices’. Sustainability, therefore, is becoming an integral part of the way the company pays its claims, manages costs and reduces its risk.

The majority of office properties for which Colonial First State Property has responsibility are rated under the Australian Building Greenhouse Rating Scheme. The company is working towards reducing greenhouse gas emissions through better operational management and abatement projects, and has achieved significant reductions in energy, greenhouse gas emissions and water use. Sustainable design principles are a feature of all fitout projects (ACCA and URS 2004).

Conclusion

The illustrations cited in this article demonstrate that the private sector plays a role in virtually all areas of sustainability. Some of the actions are a response to regulations, some have arisen as result of regulation but have gone well beyond regulatory requirements, and a substantial number have been driven by private sector recognition of opportunities to benefit their businesses while undertaking activities that contribute to sustainability. Some of the initiatives have arisen from partnerships: businesses to business, between business and non-profit organisations, and between business and government.

Although there is still a long way to go in meeting the environmental challenges facing Australia, it seems apparent that a growing number of Australian businesses recognise the opportunities as well as the challenges in achieving sustainability.

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