With the completion of COP28 in Dubai, we face a landscape filled with fresh promises - including 120+ countries pledging to triple renewable energy by 2030 and declarations to accelerate decarbonising hard-to-abate sectors and agree on a global finance framework. We canvassed our ESG experts across the firm for their predictions of key changes and trends expected in 2024.
“From accelerating transmission projects and increasing risks of ‘greenhushing’, to Australia playing a leading role in the ‘new carbon’ (nature) and sustainable finance – another dynamic year is ahead."
Claire Rogers, Head of ESG, Partner
The future of energy
A mission for transmission - With the rest of the world also trying to build out its renewable capacity, Australia needs to create an attractive market for renewable investment. A focus on accelerating transmission projects will be critical, including new mechanisms for social licence, new regulations to improve economics and planning, and innovative ways to reduce costs and increase existing capacity.
Here comes the government – The Federal Government will need to step up its underwriting support of transition projects including the recently expanded Commonwealth Capacity Investment Scheme, NSW Roadmap, Victorian SECV, direct investment by Queensland GOCs, Commonwealth Rewiring the Nation and National Reconstruction Fund.
Small is beautiful – With the current hurdles to utility-scale energy projects, we predict further activity behind the meter projects, precinct solutions, smaller distribution connected projects and disaggregated solutions. In time, we expect consolidation but for the moment, let a thousand flowers bloom.
The rise of nature
Nature is the new carbon – A global focus on natural capital is fast approaching and Australia is positioned to become a world leader. In December 2023, the Federal Government’s bills to establish the framework for a ‘world first’ Nature Repair Market (which would operate alongside the carbon market and promote private investment in nature restoration) passed both Houses of Parliament. Operational rules and project methodology determinations need to be developed in 2024 before the market becomes operational. Companies should start thinking about their impact on nature and biodiversity, what role natural capital plays in their business and how to best capitalise on the opportunities a nature market presents.
Carbon markets aren't going away
What’s in a name? The Federal Government is proposing to replace the term ‘carbon neutral’ with a new term for more clarity (which hopefully won’t have the opposite effect…) and the review of the ACCU regime will continue.
Climate reports galore
Finance departments broaden their remit – Mandatory climate reporting for the largest cohort of captured entities starts on 1 July 2024 and significant upskilling is occurring. We are seeing the remit of finance departments extend to climate reporting. Questions remain as to availability of data. Will the protection against third-party greenwashing claims remain? Who will provide assurance of all the new reports? Keep in mind, mandatory nature-based reporting is likely to follow closely on climate reporting’s heals.
Money, money, money
From laggard to leader? The Federal Government released its Sustainable Finance Strategy consultation late in 2023, signalling a move from a market-led to a government-led approach in sustainable finance. Expect 2024 to become busy as the Federal Government issues its first green bond, mandatory sustainability-related disclosure requirements are introduced and a sustainable finance taxonomy is developed in line with international best practice.
Cashed up with nowhere to go – The real problem is not a lack of interest in sustainable investment, but rather a lack of opportunities. Significant capital allocations point to all-things-ESG, but opportunities are hard to find even with parties willing to take a discount for a chance to participate.
What to watch out for...
Greenhushing and bluewashing – We expect the focus on greenwashing by both regulators and private players to continue. This is having the negative effect of causing some companies to play down their green ambitions – ‘greenhushing’ - rather than risk being accused of greenwashing. Bluewashing – misleading and deceptive statements in relation to social objectives - is also increasingly on the radar and likely to become a focus in 2024, particularly if the moratorium for climate-related disclosures makes it through.
Know your supplier – COVID provided an important lesson to everyone in understanding supply chains. Applying an ESG lens is critical to understanding scope 3 emissions, ensuring modern slavery requirements are met and starting to get a handle on the nature and biodiversity impacts of supply chains. New technologies are in development which will help in supply chain verification and provide an essential tool in supply chain management.
From risk management and mitigation, to decarbonisation and adaptation, our experts from around the world share their knowledge and insights.
