Accelerating business investment in climate change mitigation and adaptation - NZIER Insight 117

New Zealand Institute of Economic Research (Inc)
Media Release, 22 November 2024

For immediate release

NZIER’s latest Insight addresses the barriers to investment at the core of the priorities of COP29

The three key priorities of COP29 are:

• Phase out fossil fuels – Accelerating the equitable phase-out of fossil fuels to achieve net zero by 2050 or sooner and transition to renewable energy.
• Build climate-resilient societies – Empowering groups who steward nature to secure their homes, livelihoods and futures.
• Invest in financial flows towards climate. 

Addressing each of these priorities requires public and private investment. Investment is lagging behind the projected needs. 

“Investment is needed, whether it’s phasing out fossil fuels, building resilient infrastructure or pursuing transition opportunities. Accelerating that investment will require adjusting policy settings and leadership from business”, says Michael Bealing, Principal Economist at NZIER. 

Government should strengthen carbon markets, demonstrate commitment, support innovation and understand the trade-offs in the context of climate change. 

“NZIER recommends that businesses build climate action into the leadership structures, communicate the risks and opportunities of transitioning to a lower carbon activity with stakeholders, and actively assess investment opportunities in a changing climate”, says Bealing.

In this Insight, we:

• provide a framework for public and private investment in climate change mitigation and adaptation 
• assess the barriers to investment in the context of climate change 
• give recommendations for the government and business to accelerate investment.

More can be done to accelerate investment in climate change mitigation adaptation

Accelerating public and private investment in climate change mitigation and adaptation is key to future macroeconomic and business outcomes.

Commitment to international agreements has served us well in different contexts, especially trade policy and free market access. New Zealand has been successful in shaping the rules and arguing for adherence to those rules. If we can do this in the trade area, which also affects the business bottom line, we could do the same for climate action.

Global inaction on emissions reduction and transition investment leaves New Zealand vulnerable to climate change risks that we have insufficient control over. Businesses, households, and the government in New Zealand need a plan for a degree of climate change. Therefore, businesses need to consider the risks and opportunities associated with inaction, as well as the high probability scenarios for the global warming scenarios for New Zealand, their industry, and their business, and then determine the strategic actions required.

The government should continue to improve the settings for business investment, and the key actions are:

• an enduring policy commitment to a low-carbon economy and investment
• reform finance policies and financial institutions
• strengthen carbon markets to support their effectiveness
• support innovation and ensure a level playing field
• accelerate divestment and investment
• provide small businesses with tools to support knowledge, investment decisions and action.

Businesses can take the following actions to accelerate investment:

• recognise that a degree of climate change is more likely than not due to global inaction
• incorporate climate change leadership into governance and management structures
• communicate the risks, opportunities and actions with shareholders, staff, customers and supply chain partners
• champion nature-based solutions
• assess the risks and opportunities.
  
  For further information, please contact:
  Michael Bealing
  Principal Economist
  michael.bealing@nzier.org.nz | 021 254 1335