Kathryn House
Green loans, sustainability linked loans, they're becoming increasingly prevalent reflecting the property market's commitment to responsible and sustainable lending. And it's not just about reputation. Billions of dollars are required to electrify our building stock and eliminate embodied carbon in the race to net zero. Green finance is also rewarding owners with an interest rate discount, and it's becoming one of the keys to accessing capital in today's competitive market. So what do property owners and financiers need to consider? I'm Kathryn House, your Talking Property podcast host. And to cut through the jargon, did someone say taxonomy, I'm joined by the Australian Sustainable Finance Institute's Nicole Yazbek-Martin.
Nicole Yazbek-Martin
Without this common language system, you're constantly at that risk of greenwashing, and I guess that's the sort of counter to what we're trying to do.
Kathryn House
My second guest is Rory Martin, Vice President Group Sustainability for Frasers Property, an industry trailblazer on the green financing front.
Rory Martin
The expectation from lenders now is that you need to be doing this and if you're not doing it, then it'll be more leading towards a penalty as opposed to a benefit.
Kathryn House
And to get the financier's view, I'm joined by CBRE's Debt & Structured Finance Head of Origination for New South Wales, Daniel Sollorz.
Daniel Sollorz
The firmer and stronger the protocols are in place initially, lenders will gravitate to greater certainty.
Kathryn House
So let's get straight into it. Rory, this might be putting the cart before the horse, but I heard you speak at this year's NABERS Conference. Something you said really stuck with me in terms of what it means if you're not going down the green financing path. To quote you, you said, "it's not the cream you might miss out on, but your latte altogether." Can you talk our listeners through what you meant by that?
Rory Martin
Thanks, Kathryn. It's amazing how some of these things come a little bit ad lib and then they comestraight back to you not that long after, but look, I think it's coming from a place whereby access to capital is becoming harder and more competitive. So for those organisations who have their house in order, they're going to appear a lot more attractive and appealing to lenders who still need to do deals and get capital out there. So if you're well-versed and responsible in how you approach green financing, you're actually going to be more attractive because you can potentially attract a lower risk in that you're managing your emissions. We know a lot of lenders now are seeking to reduce their financed emissions or the emissions associated with their loan products. So effectively, if you're making their job easier by having a decarbonisation plan or something similar, then you're going to be first in line. And there's plenty of anecdotes now starting to appear in the industry where those organisations who are well-versed, as I say, in this space, are more competitive, more attractive, but at the same time as well, while certainly in this part of the world, they might be receiving a benefit, in other parts of the world we're seeing that shift and the expectation from lenders now is that you need to be doing this and if you're not doing it, then it'll be more leading towards a penalty as opposed to a benefit.
Kathryn House
Yes, so it's that green bonus versus brown discount.
Rory Martin
100%.
Kathryn House
So Nicole, if we take a step back, I mentioned the taxonomy in the lead into today's podcast, could you give our listeners a quick download on what the taxonomy is and why you think it's important for us to have a local taxonomy?
Nicole Yazbek-Martin
Thanks, Kathryn. So first I'll start by saying I recognise that it's a very annoying name. Annoying for me because as soon as you say the word taxonomy, people look at you with a sense of either confusion or they disconnect automatically. But it's actually conceptually, while the name seems a bit funny, it's conceptually really simple. A sustainable finance taxonomy, which is what we're talking about in the world of sustainable finance, is really a framework tool. And what it does is it classifies and defines economic activities based on the sustainability objectives. So it identifies economic assets, activities, even investible measures in the economy across the whole economy. In our instance, we're talking particularly about the property sector, that either make a substantial contribution to climate change mitigation or are what we can call net zero ready. And I guess a simple way to think about it is in a way, the shopping list for the future. So if we are thinking about transitioning to a net zero economy, the world needs to get there. If we want to operate within safe climatic limits, then our whole economy needs to transform and it needs to transform in a way that is aligned to a net zero outcome. And so what are the activities, what are the things that we need to do? How do we need to do things differently in order to be operating in that net zero world? And really, what that does is it helps investors and lenders start to talk the same language and have confidence that when they're assessing an asset, when they are trying to put a label on something, when they're structuring a deal, that they are doing it to activities that are actually driving the sustainability outcomes that they're seeking. So without this common language system, you're constantly at that risk of greenwashing. And I guess that's the counter to what we're trying to do is create something that everybody can agree on. "This is green, this building type is actually operating within those sustainability credentials," and that obviously increases investor confidence, increases consumer confidence, and hopefully more capital can start to flow in a more targeted way.
Kathryn House
Are you finding, Rory, that having a local taxonomy is going to help with your operations here?
Rory Martin
Yes, look, I think it will, Kathryn. I tongue in cheek describe where we're at in the green financing space a little bit like being in the Wild West in terms of there's deals being done, but you kind of write your own adventure sometimes when you're-
Kathryn House
Choose your own adventure. I used to love those books.
Rory Martin
Yes, it is a little bit like that because you do end up sitting down with lenders and thrashing out the things that are of mutual importance such as emissions reduction and how you build in some of those targets into your facilities. But that being said, the current default is that lenders like to meet borrowers where they are at, kind of thing. Now, that's all well and good except that borrowers are at very, very different places on their journey towards sustainability or decarbonisation, whatever it might be. Whereas typically, the benefits remain pretty consistent. So I think what the taxonomies will do is it'll bring a little bit of order to the chaos in terms of it provides a set of common language, common objectives so it gets everybody on the same page. The great thing is that it's not necessarily the only way to do it, but it'll help bring a bit of structure to it. I think personally, what I find interesting is the emergence of different taxonomies in different regions and how they'll all play together, particularly given capital is global. So large multinationals operating in Australia and other jurisdictions, how will they view, let's say the Australian taxonomy, the ASEAN taxonomy or the EU taxonomy? And I'd nearly throw that one to Nicole to be honest with you who’d be much better placed than me.
Nicole Yazbek-Martin
I'm on the case.
Rory Martin
No doubt.
Nicole Yazbek-Martin
Yes. So Rory, and to the backend of your question, Kathryn, that localisation really does help contextualise assets within the place and space that they're in. So there is some practical elements around data like the way we collect our data, the way we've reported the tools that we're using, the way we build our buildings, our building codes, the climatic conditions. These are all quite localised conditions and to have taxonomies that are broadly aligned from an interoperability point of view. So we're all trying to get to the same end goal. We're using the same science. We're using broadly the same methods for assessing what is green and not as green, but we're inputting local conditions. That's where you're actually able to get a lot of interoperability and alignment between different jurisdictions but still capturing that local benefit and understanding what the local market is doing. And I think there really, to Rory's other point of how these things all play together, there is definitely a strong push and movement from like-minded jurisdictions that see the taxonomy as a very helpful KPI when you're talking about your climate disclosures, when you're looking at your transition plans, recognising the benefits of local taxonomies and if they all, like I say, have those same framework elements so they are based on those same scientific assumptions and we're using the same approach that there is I guess a movement towards, dare I say it, equivalence, but that's the holy grail, that we get there and that Europe can say, "Australia's taxonomy is as good as ours with its localised conditions." If you're a European fund but you're investing in Australia and you're reporting against Australia's taxonomy, then you're using your own requirements. So that's the hope and that's where we are going to get to. Don't quote me when I say Europe's going to do that, but certainly, Australia I think is seeking to form closer partnerships with ASEAN, form closer partnerships with Singapore and continue to have discussions with the likes of Europe ultimately to get there in the end.
Kathryn House
And Daniel, do you think it's going to help bring more finance into the Australian market?
Daniel Sollorz
I think it'll certainly help with the appetite for sure, Kathryn. As I reflect on where we've come from and having been involved in the commercial real estate funding market for some time now, just reflecting on the last 10 years, the level of sophistication has certainly increased. The maturity and the innovation in funding solutions has seen a dramatic shift and improvement over that time. So I think we're really seeing a lockstep improvement from the market and this will be that next step, and I think it'll play through to one of the key concerns I'm hearing when I talk to lenders is how they think it through their origination requirements and what they're looking at at the backend of their facilities. They can today look at what they've got, but in three to five years, the world's going to be a different place. And that could be in relation to values if an asset is more brown than what it is green. It could also do with the availability of debt finance at that time to repay the loan. So the firmer and stronger the protocols are in place initially, lenders will gravitate to greater certainty.
Kathryn House
One thing that I'd be interested for, and it's probably as people in the sustainability industry, you’re all across this, but for listeners who might not be really au fait with some of the terminology, and I'll get someone to put their hand up to answer this question, what's the difference between a green loan and a sustainability linked loan? Does anyone want to volunteer?
Rory Martin
I can talk to how we use them, if that helps.
Kathryn House
Talk me through how we use them.
Rory Martin
And look, this is a recovering architect speaking to finance, and normally you wouldn't let architects next or near anything to do with finance, but here we are. It's a strange world we live in these days, but just summarily how we use them, it comes down to use of proceeds. So how you actually use what you've borrowed. So for us, when we look at a green loan, it's normally dedicated towards a specific activity. So for us as a property company, that's normally a development for example. So we will create a green loan facility in partnership with our lenders and then we will use the proceeds of that loan then to fund the development. Now, that development will have some sort of green, "KPI," which for us in Australia could be at this point, while the taxonomy continues to develop, fully recognising who I'm sitting here with, could be a certification because it's independently verified, validated. The lenders can get confidence that we are doing what we say we will do. So think about things like Green Star or NABERS. These kind of things can be used for a green loan. A sustainability linked loan is a bit different in that it's not as explicit in terms of the funds going directly to an explicit activity. It can be more so used at an organisational level. So for us, even though we've obviously been in Australia now for 100 years, it's our centenary year this year. Our parent group, which are SGX listed, Frasers Property Limited, for which I actually work, we borrow on behalf of the business units that exist in the Australian market, the Thai market and so on and so forth. So what that allows us to do in the sustainability link loans is secure like large facilities such as our most recent one, which got announced earlier this year, which was 904 million Singaporean dollars. And that allows us then to carve up that facility as we need within our business units. Now, in that scale, we need something that's a bit more broader. So we look at things like GRESB, so the Global Real Estate Sustainability Benchmark, and then how we as an organisation and our business units are...how they're scoring are being ranked in that certification. Again, the reason that works, again, it's independent, it's verifiable, it's credible. So then that can give the lenders further confidence that it's not just us waving a green flag saying, "Look, we're great." It's the fact that we've got a third party, some of which the data is actually assured and can be audited to give confidence that we're actually making progress. So that's how we use those two products.
Kathryn House
And Daniel, what's most prevalent right now? Are groups more going for sustainability linked loans or more pursuing green loans?
Daniel Sollorz
I think the general trend in recent times has been more towards the sustainability linked loan, that's both globally and domestically. We did see a very large rush of issuance 2021 to '23. It's probably more stabilised now following that. I'm always conscious of the Australian market that we can be skewed a little bit if there's a large issuance then the data can flow one way rather than the other. But generally speaking, we follow the global trend of more sustainability linked loans than green loans.
Kathryn House
And Daniel, another question for you. You are talking to lenders all the time. How are you seeing their current view on debt capital and how they're thinking about green financing initiatives at the moment?
Daniel Sollorz
First comment I'd make is that lending demand is very strong, and I think Rory touched on that. When you take a green loan or a sustainability linked loan opportunity to a lender, you'll get the meeting organised very, very rapidly and get very positive engagement, which is great to see. And that's regardless of the opportunity, whether it's acquisition, repositioning, repurposing, it's across the whole range of opportunity. And I think part of that also is driven by the fact that lenders, whether they're domestic or whether they're global, they've got their in-house ESG teams well linked to the debt origination teams now. So what we're seeing is a great level of support for clients and they're looking to do something to be able to draw into that negotiation early on the best way to position themselves to source sustainable finance.
Kathryn House
And are you seeing that there's a difference in approach between your traditional banks and your non-banks when it comes to providing green finance?
Daniel Sollorz
I think there's largely a similarity of overall intent, and the way that I summarised it is that they dice it up into three different areas. And the first area is what are they thinking about when they're going into a loan? What are they thinking while they've got the loan on their books? And what are they thinking when the exit of the loan or the going out. Now, the going in is really in and around they're testing the sponsor and they're testing the real estate asset that sits behind that, really strong due diligence on those two and making sure that what's getting represented, they believe get delivered through the loan term. While the loan on the books, it's saying what were the promises up front? Watching that on the way through and rewarding the client accordingly for performance against the strategy. Where the interesting debate is at the moment, and I touched on this a little bit earlier, is about how they are looking towards the repayment event at the end of a loan, all banks lend on the hope they get the money back, they generally get that through with the refinance or sale of the asset. Again, both future events and both can be in a different environment than what we've got today. So there's a lot of talk in the market and lenders are on different ends of the spectrum on whether that's a lighter touch or a more direct touch on how they manage that risk.
Rory Martin
Kathryn, you asked a really interesting question here about traditional, non-traditional. I've developed a weird hobby there lately whereby I proactively go out and seek bankers and catch up with them. So I'm finding this actually
Kathryn House
That is quite a strange hobby.
Rory Martin
Yes, and I said this to a colleague there yesterday, they said, "Rory, you're getting closer to being certifiable every day." So anyway, I'll keep going. So in this, it is fascinating because to be honest with you, we're all learning, as I said on this, and you need to actually have these conversations. And myself and Nicole have had a few of these conversations and there's a lot of mutual friends now we have in the industry that we kick some of these ideas around with. But what I caught up with one of the big four banks recently, they gave me a really fascinating anecdote whereby they were aware of a borrower in an extractive industry who went to their lending partner for...I can't remember actually if it's an existing facility or new facility. And their lender said, "No, great to see you. You're one of our favourite customers. Unfortunately, we have filled our book this year for the amount emissions that we can carry or we can lend to. So off they went then to find a non-traditional lender, and the way it was told to me was the equivalent of a payday loan shark and they got their finance, but at 400 basis points higher.
Kathryn House
That's huge. That's a huge increase.
Rory Martin
It's massive. So I've kicked this anecdote then off a few other bankers then just to test it, and what I've heard is that there is an opportunistic market starting to appear whereby there are lenders who are out there who are looking for these opportunities, whereby they know somebody is up against it because of the nature of the activity that they undertake and they're waiting in the wings to offer finance, but at those extortionate rates so that they can make a quick dollar. So I think that's something that I personally didn't see coming. And I think again, it's back to that question you posed right at the outset about the ability to access capital.
Kathryn House
Yes, loan sharks. So I'd be really interested, Rory, if you could talk us through just a few examples of what Frasers has been pursuing on the green financing front. And I believe your Australian portfolio is now fully underpinned by sustainability-linked loans.
Rory Martin
Yes, correct. So in Australia we have Frasers Property Australia and we have Frasers Property Industrial and they work together in terms of how they procure finance. So the Australian platform as we call it, is now as you say, at a 100% financing linked to sustainability KPIs, and it is a mix. So whereby let's say where the sustainability-linked loan, it's typically tied to GRESB certification. So maintaining certain scores, certain ratings in that. GRESB in itself as a benchmark looks as a whole series of different environmental, social and governance metrics that an organisation then is measured against and you're benchmarked against your peers. So it's a relative scoring as well. So it's competitive in that if your peers progress, you got to stay in step or else you'll see your score go down. So it's good in that there's no room to stand still. I mentioned that we use some green building certifications on the green loan space, so we found that to be quite useful as well. And then the other area that we've seen emerge, probably no surprise to many, is we do have one facility that's actually tied to our emissions reduction. And that's been a fascinating journey in terms of when you think of a property development, because at its very nature emissions are a byproduct of activity levels. So you could set a baseline year where you've had a bumper year or you've been in the thick of COVID and it's meant to be reflective of an average year. But if you think we're coming off the back of a very hot few years when it comes to residential development. So you're naturally going to see the residential sector’s emissions from the development perspective drop off. So I think one of the things that I've learned in engaging with lenders is sharing the insights they might not necessarily be privy to. So sharing things like when residential development occurs, you're accounting for not just the development process but the operations of those homes for up to 60 years thereafter. So this is where things like trying to get a bit of line of sight on where the grid is going, where key materials such as concrete, steel and glass are going, overlaying those changes on top of, well, what's your activity level likely to be? And I think again, one of the fascinating things that we have in this space is the disconnect or inconsistency between time horizons. We look at these facilities typically over five-year time horizons. Most property companies will have good data on the next 12 months and some data on the years thereafter, but we're setting these targets with a line of sight out to 2050. So for me, I think the emissions piece is very interesting because the other trend I'm seeing now as well is that apart from the carrot and stick in the green sustainable finance space, we're also seeing a big focus on emissions reduction because you look at the big four, they've all got eye-watering targets, $100 million, $80 million in terms of how much they want to put into green and sustainable financing. To Daniel's point, they've made these statements publicly and committed publicly as well. So you're seeing a big focus now on emissions reductions, but you're also seeing increasingly, instead of it just being one KPI associated with a facility, there might actually be two KPIs. Now, for me when I've had those conversations, it's like, well, as a borrower, what's important to you and what would you like to bake into this? But I think the elephant that's in the room when we look at this space is that we all know climate change is going to happen irrespective of how we progress towards net-zero. We all know as well that borrowers and lenders are running climate risk analysis across their portfolios, their activities. They're starting to figure out where the hot spots are in terms of risk. So I guess for me, the question I'm starting to ask now as well, at what point do we start to see targets in and around physical climate change start to come into this? So I think in terms of what we see happening, how we've used some of these considerations, so part of it is about understanding where the market is at, but trying to get a sense through conversations like this as to where the market is actually going. So you can start to orientate yourself towards that as well.
Kathryn House
So when it comes to dollars and cents, and I know that's what the developers and investors are really zeroing in on, what can it mean for your bottom line and is that a big draw card for companies when they're looking at green finance? Maybe I could throw to you, Nicole.
Nicole Yazbek-Martin
Well, I'm not borrowing anyone any money, but-
Kathryn House
I'll get Daniel to buy in on this one as well.
Nicole Yazbek-Martin
Look, it really can, I think result in some substantive discounts. I think there is definitely a green premium that's up grabs at the moment and I see the level of inequality shifting, right? So it's not just about, I think where we were five years ago, and a lot of it has been around this coalescence around strengthening up the definitions, tightening up what we mean by what we're talking about. What was good five years ago is not necessarily what's acceptable now in terms of the quality. And especially with technologies that have emerged and we know a lot more now, we're so much better at accounting for things, there's a race to the top. But for those at the top, I think that there is a prize to be had. I think more and more though, it'll be interesting to see how that dynamic shifts in terms of that becoming a new norm or expectation. And then those that don't meet that expectation, will it be a penalty or will it continue to be a carrot? I'm not too sure about that. So would be keen to hear Daniel's views on where you see the market going?
Daniel Sollorz
Yes, absolutely. And I guess to some degree, you can point towards deals that have been done in the market, market releases indicating that the price benefit to meeting your criteria under a sustainable linked loan five basis points, and in some cases if you've missed the criteria penalty of five basis points. But I think the bigger picture element is, to my point earlier around lending demand being so strong, when demand is strong, that'll obtain a better market position in any case. And I agree Nicole, I think that's a really interesting topic at the moment to think about carrot and stick approach. There's no doubt an assessment of increasing risk, that comes with increasing price and assets that aren't getting delivered in the manner that it needs to be done, is that the role of the finances determine that. And if they don't decide to, then does the regulator begin to come into play as well and potentially penalise capital costs for banks which will be driving higher prices?
Nicole Yazbek-Martin
Yeah, I think though, just quickly, importantly, and I think linked to that is that we’ve got to recognise, like we spoke about the taxonomy shopping list for the future. We do have a huge incumbent asset base and we need to think about what the solutions are for that incumbent asset base and there will be some brown assets that probably can't be saved and we probably need to start from scratch. But we’ve got to think about things like embodied carbon and what that means. And there are going to be a whole lot of assets that don't meet that criteria for green, but that we want to create pathways in order to incentivise to get them there. So I think to Daniel's point, when you're looking at your existing portfolio, you're looking at your repayment and you're saying, "Okay, I have an asset that's probably going to fall a bit behind. What do we do with that asset?" And what we do want is we want to create mechanisms to help those assets as well. Right? We've got an existing incumbent economy and this goes even beyond the property sector and we need to shift that as well as the massive amount of new investment that we're going to make into new green assets. And so really thinking about what that means and how we can create that incentive system to those assets that might not be performing where we want them to, but we think we can get them there as well.
Kathryn House
And Rory, how important is it, do you think, to have a whole-of-company approach to getting these green financing initiatives over the line and how important is it to get the non-sustainability folk to buy in?
Rory Martin
Yes, look Kathryn, it's critical, as simple as that. And for us, what really helped I think focus things was when we developed our sustainable finance framework, which is available on the Frasers Property website. If you do want to go and actually have a look at what one of these things looks like, and that has to be publicly available as part of our agreements with our lenders, but we work hand in glove with our Treasury Department and they've got a real taste for this and they've done a lot of deals. They've worked with the right lenders as well. So they've worked with like-minded lenders who are looking to be proactive and co-create this as well, but it's not just your brothers and sisters in the Treasury team. It's understanding how this flows through to your reporting. So working on that side, but then as well, the guys and girls that are on the ground. So I've seen development teams go, "well, I'm not sure if we'll get our Green Star recertification this year, Rory." And I said, "look, that's fine. You do recognise that that's linked to your financing and that while whatever the financial impact might be as well, we're going to have to consider how you have that conversation with the lenders’ and then all of a sudden you just see the penny drop and then you see, no, it's okay, we've got that certification in the bag, kind of thing. And I'm simplifying it, but where I think the whole sustainable finance journey started for us is that we were on the sustainability journey over a decade ago. In 2018, we started baselining our emissions and we did our first net-zero science-based target submission. The thing for us was how do we unlock value? And I think in the property sector, we're very risk focused, very risk averse. Effectively, property developers particularly, they price risk. It's basically what their job is. So if you can also balance that well, we're doing all this good work, there are opportunities to be had and just start having those conversations internally and then with those who are already walking the walk externally, I think then you can really start to make headway. The important thing as well is just to make this content accessible. I'm not saying dumb it down, but actually speak plain English. Talk about, "well, what's the taxonomy actually trying to do?" And that's why I love listening to when Nicole speaks about it because really, it's just trying to get everybody going the same direction, leaving no one behind or no building behind. And then that way, people can buy into it. So this is something I think that you have to want to do, but again, the fallback is if you don't get on board with it, you could be the one then who's left wanting if you haven't got your house in order when it comes to sustainability and what the lenders expect.
Kathryn House
One of the last questions I was keen to explore isthe Australian Accounting Standards Board is phasing in a new reporting regime from January 2025. Companies with a turnover of $500 million will be the first required to disclose their net zero targets, emissions profiles across all three scopes and their climate related risks and opportunities. Do you think this is going to propel more companies to consider green finance?
Nicole Yazbek-Martin
I think the way that I like to see it, if we think about the intent behind and the drivers behind climate disclosures, which was really born in the instance of we need to understand as a market, we need to understand the risks that are just over the horizon, which are not in that three-year investment or debt cycle, five-year investment or debt cycle. We need a mechanism for us to see a little bit broader because this could be a macroeconomic instability issue. So we’ve all got to start thinking about what these risks are. So what climate disclosures really does is focus you. What does this mean for your business? What does climate change mean for your business? What both from a physical risk point of view, to Rory's earlier point, but also as the economy transitions, is your business still fit for purpose and do you need to change what you do or are you going to be facing that Kodak moment? Right? That really, I guess helps to focus entities and think about things about where their place is in a net zero world. That hopefully propels them to say, "okay, I'm going to set some targets. I want to move. I want to stay relevant. I want to thrive. I want to grab these opportunities. I'm in the box seat to really grow as a business in a net zero world. I'm going to set a target. I'm going to put in place a plan." That's what transition plans are all about. So that's part of the disclosures framework. "I'm going to put in place a transition plan that tells everybody where I am today and how I'm going to get from where I am to where I need to be. And then I need to actually, in most instances, start lending and expanding capital towards new opportunities." And that's also where the taxonomy comes in. "Here's my new shopping list. This is where I want to pivot my business towards this new net zero opportunity. And as part of that, how can I access some green finance to get me there?" So I actually do see it if we follow that chain as really businesses first recognising and understanding what their risks are, but then focusing towards the opportunity. And as part of that opportunity, I think hopefully green finance will be there to service them.
Rory Martin
I'll just add to that. The nature of the standards is to basically get everyone to say, "well, this is how we're going on our emissions, our physical risk," as Nicole said. You're already halfway there to some of the hard work you have to do to support KPIs within a green loan or sustainability linked loan because lenders will want to see your emissions. Right? They'll want to see what you're doing in other ESG areas. You'll have to do that under the standards. So already you're producing the documentation that would validate whether you're in line with your KPIs or not. So that's actually going to save a lot of organisations a headache in terms of getting all that infrastructure set up in the first instance. All you have to do, and I don't mean to downplay this, is then you just have to show that you're actually making progress towards any of the targets that you've set.
Kathryn House
So maybe one last quick question for everyone. What's next? Nicole, is there something that you'd like to see happening that's going to really propel us on this journey?
Nicole Yazbek-Martin
Yes. Well, I'll just give a little bit of a plug if I may, for the Australian Sustainable Finance Taxonomy. We did go out in June with draft criteria for the building sector, and we got some really great engagement and input and feedback, and we'll be going out again in November with almost, I would say a near final version of criteria for the building sector together with a whole lot of other sectors in the economy. So really, if any of your listeners are interested in that and interested in contributing, then please watch out for that. I think what we would love to see going forward is I think the next frontier or continuation of what we need to do to have a built environment that is 2050 ready is we need to also focus on adaptation and resilience. Right? This needs to come into the thinking when we're building a building that is not only efficient, electrified and operating in a way that is net zero, but it is also going to withstand what is the climate change that's already baked in, and hopefully we can restrict those impacts as much as possible. So I would love to see more of a focus on adaptation and resilience and ways in which we can actually not make it a public finance problem always, but what role can private finance play in incentivising that?
Kathryn House
Daniel, what do you think is next?
Daniel Sollorz
There's been a big strong wave of sustainable finance, clearly. The next set of waves, we'd love to see the more secondary assets get driven into more sustainable finance terms, whether that be driven by owners, occupiers or financiers or all three. It's going to be challenging times in that front, but naturally exciting times.
Kathryn House
And Rory, lucky last.
Rory Martin
Yes. Look, we're seeing the Europeans now penalise borrowers in a lot of cases where they're not pursuing sustainability commitments within their facilities. We're seeing a lot of the Asian banks on the other end still offering green benefits, and we're seeing the Australians now start to shift from more of let's say the Asian side to somewhere in the middle in that there's still green benefits, but now they're introducing brown penalties. So I would say that if you're not in this space, you're not thinking about how you're going to manage your ESG-related risk, get amongst it now, start asking the questions because it's going to shift very quickly into more of the penalty space. And part of the reason, I think why we're still seeing a lot of the green benefit of premium in Southeast Asia is that there's a massive competition between Singapore and Hong Kong in terms of who can attract capital and who can be the green finance centre of Asia. So that's why it's still a little bit more on the benevolent side. So I think that's the trend that we're going to see, and I'd say Australia will move ahead of the curve in terms of Asia, but it'll be behind the curve in terms of where Europe is.
Kathryn House
Well, thank you so much for joining today, Rory. It was so great to get your insights.
Rory Martin
Thank you, Kathryn.
Kathryn House
And Nicole, I do appreciate you coming on the show to give us particularly the lowdown on the taxonomy.
Nicole Yazbek-Martin
Thanks, Kathryn. It was great to be here.
Kathryn House
And Daniel, really great to have you on the program as well. Good to get the view on what's happening with the financiers.
Daniel Sollorz
Thanks very much, Kathryn.
Kathryn House
To our listeners, thanks for tuning in. As always, we'd love it if you could rate or review Talking Property to help spread the word. And if you have any questions or feedback about this episode, you can drop me a note at any time via
[email protected]. Until next time.
