Spearheading change: The financial sector's role in shaping a sustainable future for Australia

Australia's economy stands at a crossroads: achieve a net-zero, nature-positive future or face lasting ecological and economic destabilisation. Financial services organisations are not just intermediaries in this transition. They are potentially catalysts.

With significant investment needed to meet climate goals by 2050, the sector's strategic choices will determine the pace and fairness of the transition. Yet, as geopolitical volatility, regulatory complexity, and scrutiny over greenwashing intensify, FS leaders must confront hard questions about their role, priorities, and collective impact.

The path to net zero is fraught with challenges that demand urgent, coordinated action:

The consequence of a changing climate raises systemic risks for markets and businesses. The past ten years have been the hottest ten on record.  Biodiversity loss is accelerating at unprecedented rates. Extreme weather events have increased in frequency and intensity, and the insurance cost of these events have risen significantly. These systemic risks threaten asset valuations, supply chains, and insurability. Eighty per cent of Australian directors identify climate change as a material risk to their business.

Diverse stakeholder views create inertia and threaten social licence. Despite growing awareness of climate issues, social licence is proving harder to obtain from communities and shareholders. Regional and rural communities are increasingly dissatisfied with the consultation process for renewable energy projects, with implications on their viability. Anti-ESG shareholder activism is also on the rise, as organisations strive to balance short-term profitability with climate action.

Consumer and regulator backlash to greenwashing is limiting ambition. Australian consumers are increasingly sceptical of corporate sustainability claims. Firms risk legal and reputational fallout if pledges lack credible, granular roadmaps. ASIC and the ACCC have also intensified their focus on greenwashing, with several recent high-profile cases against prominent businesses.

Regulatory changes are extensive and require fast investment and capability building. The Australian Government's proposed Sustainable Finance Strategy and mandatory climate-related financial disclosures are reshaping the regulatory landscape. Over the next three years, the mandatory Australian Sustainability Reporting Standards will mean around 50 per cent of the Australian economy will start to disclose climate-related financial risks, report on its environmental and social impacts, and demonstrate progress toward sustainability goals in line with global best practices.  FS firms face evolving standards and mounting pressure for science-based transition plans.

Operational challenges and competing priorities are barriers to action. Many Australian institutions struggle to move beyond pilot projects due to data gaps, unclear ROI, and competing priorities. Much ESG data is inconsistent, incomplete, fragmented, and difficult to analyse. ESG and sustainability initiatives often deliver long-term benefits like risk mitigation, making it difficult to calculate impact in the short-term. 

At Nous, we’ve worked extensively with government, energy providers, and other organisations with pivotal roles in the energy transition. From this work, we know FS leaders will need to ask themselves six critical questions.

What does effective leadership look like – and what's holding you back?

There is a clear call to action to avoid the worst of the climate and ecological breakdown in front of us, yet the solutions and path forward are less clear. Strong leadership is critical to navigate the obstacles on the journey towards a net zero and nature-positive future.

What holds many leaders back isn’t a lack of ambition. It’s the complexity, the uncertainty, and the fear of getting it wrong. Strong leadership today demands more than technical expertise. It requires the courage to make values-based decisions, to adapt when the path forward is unclear, and to lead others through change. Our experience supporting organisations navigate complex change has reinforced the importance of adaptive leadership in empowering leaders and organisations to make values-based decisions in the face of uncertainty.

What do I prioritise?

The road to net zero will require significant investment and change, and FS leaders will need to make tough decisions across capital flows to carbon heavy sectors, investment in data infrastructure and capacity, and building internal ESG capability. Leaders must balance a range of perspectives and priorities. In the face of ever-changing information and circumstances, leaders must avoid decision paralysis in the pursuit of the perfect solution.

Working alongside leaders at their critical junctures has demonstrated the importance of ruthless prioritisation to ensure that decision-makers are empowered to make the tough but crucial decisions necessary for the times.

How do we engage customers and communities as partners in the transition?

Stakeholders from customers, communities impacted by large projects, to shareholders, must be brought along the transition journey. Transparent, genuine, and robust engagement is key to ensuring all parties in your periphery are clear on your intent and actions. This is particularly relevant given the decarbonisation of the economy will require action across all sectors. ESG-leading financial institutions will need to deliver products and services that consider and meet the needs and priorities of these customers, whether concerns about greenwashing, the need for long-term risk mitigation, or the desire to prioritise climate resilience and adaptation.

Our role in facilitating community engagement for organisations has highlighted the importance of connecting with your most important stakeholders, and the benefits of building a shared vision for the future.

How do I organise my business and unlock internal capability?

Net zero is an extraordinary finance opportunity that goes beyond just decarbonisation. Financing and investment is pivotal in enabling this transition, and there is an incredible opportunity for leading financial institutions. Your business will need strong internal capability to lead the transition, from ESG-specific expertise across net-zero and nature positive, to the necessary data infrastructure and skills to manage reporting, and people leaders to embed ESG across all levels of your business. 

Our work supporting diverse organisations on their ESG journeys has underscored the importance of aligning your operating model and internal capabilities to meet the challenge of achieving a more sustainable future.

What should our policy advocacy look like?

A just and equitable transition is dependent on active intervention. The scale of change required means shocks and road bumps are inevitable, from increased power and transport prices to job displacement and increasing levels of public and private debt. Low-income and vulnerable communities will almost certainly be disproportionately impacted as the global economy shifts towards a net-zero future.

Financial institutions are well-positioned to identify the obstacles slowing the transition and to ensure that it is both economically and socially inclusive and equitable. Leaders should work alongside regulators, policymakers, and industry groups to shape policies and initiatives that lead towards a more sustainable future. 

How do we maximise collective opportunities for sector-wide impact?

Sector-wide collaboration can grow the size of the pie and spearhead the required systemic change, driving harmonisation in data and reporting, informing government dialogue and action, and shaping policies and initiatives. Working with industry bodies and other collaborators has reinforced the power of a shared and compelling perspective, and its ability to shape and deliver benefits for the sector, businesses, and ultimately customers and communities.

The financial sector's contribution to Australia's net-zero transition is pivotal – but incrementalism won't suffice. By embedding nature-positive strategies, demanding robust policy frameworks, and prioritising scalable solutions, FS organisations can transform from funders to architects of a sustainable economy.

The time for leadership is now – before the window for a just and orderly transition closes for Australia.

Get in touch to discuss how your organisation can contribute to Australia's transition to net zero.

Connect with Carlos Blanco, Tony Fiddes, and Lachlan Iape on LinkedIn.