Outlook 24: a climate of change

Shifting funding needs and regulatory expectations will force businesses to consider several critical sustainability themes in 2024 amid the ongoing push toward net-zero carbon.

Developments at December’s COP28 have put adaptation finance in the spotlight, and increased usage of blended finance will be needed to meet changing funding requirements for many organisations going forward.

There is growing interest, particularly in Asia, around the deployment of transition finance, and the new year is expected to bring increased demand for clarity from all market participants around what transition finance is, and how it works.

The market has already seen Japan unveil plans to issue a large tranche of transition bonds in the coming months, while criteria for transitional economic activity were included in the Singapore-Asia sustainable finance taxonomy.

Separately, the conversation around nature-based finance has been bubbling away for a few years, but several factors in 2024 could accelerate action in the space.

Improved disclosure, allowing financial institutions to make more informed funding and investment decisions, will be critical for growth in this sector. Increased pressure around disclosure in 2024 will come from work done by the Taskforce on Nature-related Financial Disclosures, as well as growing interest from both regulators and investors.

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In addition, expect the social finance agenda to gain further recognition in 2024.

Newly enhanced due diligence requirements in the European Union, with a focus on human rights and the environment, will play a role in shining a light on this space in 2024.

Elsewhere, shifting expectations around the use of plastic is another conversation that is expected to develop further in 2024.

In 2022, 175 nations agreed to develop a legally binding agreement on the plastic market by 2024,  with a goal to end plastic pollution by 2040. Negotiations have been underway since and are expected to be completed by the end of the year.

Needs

Finally, the transportation sector will continue to be in focus in 2024, where the energy transition is fuelling the growth in electric-vehicle sales and attracting investments across the value chain.

In our region, Indonesia is ramping up its local processing capacity for critical minerals, presenting an opportunity for Australia given its rich resources in the space. China is investing heavily in the battery space, while in the United States and Europe, plans for gigafactories are underway.

These opportunities are not constrained to the passenger car segment, with alternative fuels a growing theme in public transport, air travel and even shipping.

Mara Chiorean is Executive Director, Sustainable Finance International at ANZ