Shaw JamesHon JAMES SHAW (Minister of Climate Change): Thank you Mr Speaker. Well it's a shame actually that Todd McClay wasn't on the consultation launch yesterday. There were just shy of 600 people. I was scrolling through the list of participants. It's a pretty large group of people interested in where this thing is going and it is a shame that Todd McClay wasn't on it because then his speech would be better informed and less ignorant than what we just saw.There are not a lot of good news days when it comes to climate change but today is one of them. Today is a good news day in the domain of climate change and I want to start by thanking the Hon Dr David Clark who has led this bill through the House through to its completion. I am very grateful for the work that he has done as well as all of those people from the financial markets industry who have worked alongside officials from the Ministry of Business Innovation and Employment as well as the Ministry for the Environment—grateful for all of their hard work to make sure that the legislation delivers on the objectives. I also wanted to thank all of those who submitted on the bill and obviously the members of the Economic Development Science and Innovation Committee for all of their hard work. There were a number of improvements that came out of that process and I think it is again very good news when you can see how a bill is improved by the quality of submissions that are received both on paper and through that select committee process. So I do want to thank all of those people who actively engaged in it because it is now a better bill than it was when we started and as always in these processes there are areas which were discovered during the process and remedies that were applied towards that so that is good.Despite the kind of fairly sweeping generalisations and inaccuracies in the National Party spokesperson's speech just now I do want to thank the National Party for their support for this bill. It does demonstrate that it is widely supported. It does reflect the fact that when the Government went out in the previous term to consult with the community saying Should we be introducing a mandatory climate-related financial disclosures regime?" 86 percent of private sector submitters were in favour of a mandatory regime. National of course purports to be the party of business so it's good to see that they're not so out of touch with the business community that they weren't able to reflect the enthusiasm with which the private sector has embraced this legislation.The reason why—and it is unusual of course for business to say yes actually we would like a mandatory regime that we can all be a part of—is because actually it is now widely understood that climate change does represent a real material risk to business. But it is difficult on a voluntary basis for companies to report because in showing the risks that they are exposed to if their competitor businesses don't also do that then that company no matter how good its intentions is exposing itself in ways that its competitors are not. So the reason why mandatory reporting was so widely supported in the private sector was because people felt that it would introduce a level playing field and actually make it easier for them to report. And obviously the financial sector fund managers analysts directors and so on are also very interested in ensuring that this information comes to light because of the very material risks.Now I would like to just start with the genesis of this legislation just to remind the House where this has come from. As it happens I was at the conference of the parties in Paris. I was in Opposition at the time. I was there as a guest of the then climate change Minister Tim Groser. He had started what is now a longstanding approach to bipartisan participation in the United Nations Framework Convention on Climate Change process. Of course I have continued that in extending the invitations to the Opposition spokesperson to join us along on those and unfortunately it's been somewhat ungraciously declined this year which I think is a signal of the kind of backward steps that the National Party are taking when it comes to climate change desperately trying to get themselves out of the bipartisan consensus that their predecessors were involved in starting.So I was over there as a guest of the then climate change Minister the Hon Tim Groser but of course because I was in Opposition I wasn't involved directly in the negotiations. I went along to the launch of the Task Force on Climate-related Financial Disclosures which was chaired by Michael Bloomberg and Mark Carney who was then of course the Governor of the Bank of England. These two gentlemen are particularly dry economically You could not accuse either of them of being radical hippies in any sense but the language that they were using really was sounding the alarm and there was a key phrase that I think Mark Carney used. He said that in their assessment in the assessment of that task force there are literally of trillions of dollars of unquantified undisclosed and therefore unmanaged risk sitting on corporate balance sheets as a result of climate change—trillions of dollars of risk that is not known about by the directors or the shareholders of those businesses and of course that represents a material risk to those businesses themselves. It represents a material risk to the owners of those businesses. Actually it's so wide scale it also represents a risk to the financial system itself which is why central banks like the Bank of England are so interested in supporting this climate-related financial disclosures regime and why our own central bank the Reserve Bank was so keen for us to adopt this legislation.That risk falls into roughly two categories. The first is kind of physical risk if you like: do I have assets that are on the coast that are exposed to sea-level rise or on flood plains; do I have agricultural businesses that will be exposed to risk from increasingly severe and frequent droughts or floods or storms or in some cases wild fires and so on. So the physical risks that are associated with climate change.Maureen Pugh: That's rubbish—you know it.Hon JAMES SHAW: And of course the second category of risk—coming from the West Coast! The second category of risk is related to what we call stranded asset risk and that is of course that as the world transitions particularly away from fossil fuels or other high emissions intensive industries my investments in those businesses may actually degrade over time.Fossil fuels are of course the kind of most obvious example of this. We know scientifically that we cannot burn 80 percent of the known reserves of oil and gas and still be able to stay within 1.5 degrees of global warning. But of course the valuations of those companies on the stock exchange is based on the idea that you can extract and burn 100 percent of those reserves. So therefore that represents a very significant write-down risk for those companies and you can see that starting to flow through. Particularly I think it was BP not all that long ago had a huge write-down of some of their reserves on that basis. And so without being able to assess to have a methodology for assessing these risks directors investors fund managers and analysts are in the dark about the scale of the risks that their investments are exposed to. What that means is that they cannot price risk they cannot allocate capital in a way that makes sense. Of course you know as the previous speaker mentioned it doesn't necessarily mean that they're not going to continue investing in oil and gas or in other industries that are exposed to those risks but they can at least price that risk according to the scale of the challenge that is in front of them. But of course the safest thing to do is to allocate your capital to low emissions businesses that are resilient to the effects of climate change. And so what you will see as a result of this legislation and the standards that are being produced by the External Reporting Board is people starting to make decisions about where to put their money in ways that ensure that it is safe over the long term. Of course what that will mean is that businesses will themselves start to make decisions about how to reduce their emissions profile how to build up their adaptive capability and their resilience. That is about creating momentum in the economy away from the very high pollution economy that we've had in the past towards a low or even zero emission economy in the future. So in that sense it is a small intervention. You might think that corporate reporting by itself is you know particularly dry isn't necessarily going to make a difference but my firm belief and the belief of many people around the world is that it's going to make a significant difference. I commend it to the House."