The New Zealand Minister of Climate Change asked the Centre for Sustainable Finance Toitū Tahua to prepare a set of recommendations for a sustainable finance taxonomy. Draft recommendations were developed by an Independent Technical Advisory Group and released for feedback by 5 May 2024. Heliocene founder, Jennifer Wilkins, submitted feedback on 1 May 2024, copied below.
The sustainable finance taxonomy advocated by the Minister of Climate Change is an overdue finance policy instrument for New Zealand to establish a standardised framework classifying sustainable economy objectives, thereby enabling investors to direct funds in alignment with New Zealand’s commitments to the Paris Agreement and other sustainability goals.
This submission responds to the Exposure Draft issued by the Independent Technical Advisory Group (ITAG) convened to design key elements. The ITAG recommendations innovatively incorporate an indigenous lens. However, they fall short on embracing an equally innovative post-growth transition objective.
Considering the plausible scenario in which aggregate economic growth is no longer a viable or desirable pathway to environmental and social sustainability, it is imperative that the taxonomy ensures a financial system that can engage proactively and transparently with post-growth projects and develop innovative post-growth financial instruments tailored to this paradigm shift.
It is notable that this year, the International Degrowth Conference will host a panel discussion on investing in degrowth; in 2023, European investment bank Triodos advocated for open discourse on a post growth economy; and, as far back as 2022, I was invited by New York investment bank Jefferies to present to their global client base on the topic of degrowth. These are just a few of the parties interested in how finance may be used to facilitate a shift from the growth paradigm, as a sustainability approach.
Therefore, I propose an additional alternative investment objective to the taxonomy: transition to a post-growth economy.
This objective would encompass projects and financial innovations facilitating a shift towards sustainability by downscaling throughput that is environmentally unsafe to humans or less necessary to human needs and upscaling economic activities that provision universal basic wellbeing within planetary boundaries.
It is in our own interests to formulate sustainability policy instruments that reflect our unique identity and position New Zealand as a trailblazer in sustainable finance on the global stage. By incorporating both growth and post-growth paradigms, alongside an indigenous lens, we can develop a taxonomy that is distinctive and influential among our peer nations.
Regarding Recommendation 1
The proposed additional alternative objective does not conflict with the ITAG’s recommended principles for the taxonomy and may strengthen them in several ways.
- Credibility – a rapidly expanding field of research provides an evidence base for the potential to develop a thriving post-growth economy focused on meeting wellbeing needs with a lower social metabolism. The objective strengthens the credibility of the taxonomy by aligning with an emerging investment motivation. It also reduces the influence of political and industry actors who would prefer to hide proactive ventures and finance innovations by subsuming them into the existing objectives recommended by the ITAG.
- Usability – the exclusion of a post-growth objective reduces the usability of the recommended taxonomy.
- Interoperability – as a ground-breaking innovation, inclusion of a post-growth transition objective will set a new standard of best practice for sustainable finance taxonomies globally. By basing the proposed design of the New Zealand taxonomy on other green taxonomies, none of which has considered post-growth economics, the ITAG has missed an important opportunity to innovate. A taxonomy that enables clear signalling that some capital is moving towards post growth-aligned projects enables New Zealand to demonstrate to the world that optionality and resilience are being built into our financial and economic systems.
- Culture – the objective does not conflict with indigenous rights and post growth economics generally has overlapping values with indigenous cultures, including community self-determination and operating the economy within nature.
- Prioritisation – as it is a plausible economy-wide paradigm, all sectors should be preparing for a post-growth future. See also recommendation 5.
Regarding Recommendation 2
The proposed additional alternative objective does not conflict with the ITAG’s recommended purpose statement of the taxonomy: “The sustainable Taxonomy of Aotearoa New Zealand is a classification system for mobilising and directing capital flows to build a low-emissions, Paris-aligned future, restore nature and uphold the rights and interests of indigenous people of the land”.
Regarding Recommendation 3
The proposed additional alternative objective does not conflict with the ITAG’s recommendation to embed the rights and knowledge of iwi/Māori into the design of the taxonomy.
Regarding Recommendation 4
The proposed additional alternative objective does not conflict with any of the ITAG’s recommended environmental objectives. It would meet or even exceed goals to Do No Significant Harm and include Minimum Social Safeguards. As a systemic socio-ecological approach, a post-growth transition objective lays groundwork for developing future nature and social objectives.
Regarding Recommendation 5
The proposed additional alternative objective would likely influence the ITAG’s recommended ranking of priority sectors for the taxonomy. The transition to a post-growth economy focuses on socio-ecological outcomes, not either/or trade-offs. In other words, it is a focus on meeting human needs fairly while at the same time operating within planetary boundaries.
Regarding Recommendation 6
The proposed additional alternative objective is not ruled out by the ITAG’s recommendation to use the ANZSIC industrial classification. Priority activities could include provisioning nutrition, energy, housing, mobility and digital connectivity, for instance. This brings an alternative lens to establishing sector prioritisation but existing industry classifications can likely be adapted to this perspective.
Regarding Recommendation 7
The proposed additional alternative objective does not conflict with the ITAG’s recommendation to connect to existing data, national and international labels and criteria while also growing relevant capacity and increasing the availability of new information over time. The data requirements of the proposed objective overlaps general economy data requirements, including social and ecological quantitative and qualitative data that are in the public interest. For instance, the Parliamentary Commissioner for the Environment recently published a paper identifying data gaps for measuring national economic production and consumption.
Regarding Recommendation 8
The proposed additional alternative objective does not conflict with the ITAG’s recommendation to link to existing disclosure requirements – e.g. Aotearoa New Zealand Climate Standards. A post-growth economy is a plausible climate scenario and may be taken into consideration when testing the robustness of business strategy across a range of plausible futures.
Regarding Recommendation 9
The proposed additional alternative objective does not conflict with the ITAG’s recommendation to ensure that the taxonomy is fit-for-purpose across a range of key stakeholders in New Zealand including regulatory agencies, the public sector, iwi/Māori and capital market stakeholders.
Regarding Recommendation 10
The proposed additional alternative objective does not conflict with the ITAG’s recommendation not to mandate the use of the Taxonomy in its initial phase, but to phase in mandatory use over time or following a grace period.
Regarding Recommendation 11
The proposed additional alternative objective does not conflict with the ITAG’s recommendation that the taxonomy should be designed for a broad range of applications, not just debt markets.
Regarding Recommendation 12
The proposed additional alternative objective does not conflict with the ITAG’s recommendation that the Taxonomy should have a role in facilitating transition finance.
Regarding Recommendation 13
The proposed additional alternative objective does not conflict with the ITAG’s recommendation that the taxonomy should adopt an alignment approach based on technical screening criteria that are binary, credible and internationally-recognised
Regarding Recommendation 14
The proposed additional alternative objective does not conflict with the ITAG’s recommendation that the technical screening criteria can be complemented by whitelists (technologies or measures) where deemed necessary.
Regarding Recommendation 15
The proposed additional alternative objective does not conflict with the ITAG’s recommendation that the taxonomy should focus on defining 1.5 degree aligned ‘green’ activities as a priority but consider the use of a separate transition category to encourage substantial movements towards a 1.5-degree pathway for a defined and limited list of sectors/activities that are material and relevant to Aotearoa New Zealand.
Regarding Recommendation 16
The proposed additional alternative objective does not conflict with the ITAG’s recommendation to consider adopting a traffic light system to label transitioning activities that is based on a robust methodology to ensure that any transition category or label is used to drive material step changes to emissions beyond business as usual.
Regarding Recommendation 17
The proposed additional alternative objective does not conflict with the ITAG’s recommendation to adopt a three-tiered governance structure to ensure the transparency and credibility of its development process and with formal roles for iwi/Māori across all tiers. However, it is suggested that at each level of governance some members are familiar with post growth economics.
Regarding Recommendation 18
The proposed additional alternative objective does not conflict with the ITAG’s recommendation that funding for the taxonomy should be provided from a different agency/source than the government oversight group.
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