Building a Sustainable Future: Empowering Emerging Generations in Banking for Climate Action in Aotearoa New Zealand
*The views expressed by this Rangatahi member are their own and do not necessarily reflect the opinions or positions of the organisation(s) they represent.
In March, in collaboration with our Leading Partners, The Aotearoa Circle established a Rangatahi Advisory Panel, to ensure intergenerational oversight of critical work at a governance level.
As part of this, each month we will include in our Circular ‘Rangatahi Perspective’, which will accompany our monthly Partner Perspectives. Our inaugural contribution comes from Jill Kwan, a member of the Rangatahi Advisory Panel representing Westpac.
Name
Ji Lian (Jill) Kwan
Your whakapapa / heritage and background :
I am third-generation Malaysian Chinese, my ancestors tracing back to Guangzhou. I grew up between Kuala Lumpur and Melbourne, and moved to Tāmaki Makaurau almost five years ago.
What excites you about the opportunity to be a Rangatahi Advisory Panel Member for The Aotearoa Circle?
Though there has been rising interest in sustainability across our sectors in NZ, the voices that form our boards and leadership teams severely lack diversity - be it age, gender, or ethnicity. It is also troubling that the needs and concerns of climate change’s most impacted stakeholders – rangatahi today across intersectional groups – are not clearly considered at the heart of senior decision-making, nor are there clear lines of accountability to enable this.
I see the RAP as a unique opportunity to help bridge the gap. I am excited to be representing the voices of my generation and communities in a governance context, and to be collaborating with a diverse panel to make a meaningful contribution.
How would you like emerging generations to contribute to decision making and leadership - now and in 20 years time?
When organisational leaders make decisions, they must proactively anticipate the externalities that might arise, and to mitigate any negative outcomes before they are able to materialise. Often the most well-meaning leaders are blindsided to the specific concerns and community impacts far removed from their backgrounds; so consider how powerful it could be if organisations embedded intersectional feedback, including that of emerging generations, into their formal governance and reporting structures.
Formal governance and oversight can provide the necessary rigour, structure, and transparency over an organisation’s dealings, as well as its distribution of roles and responsibilities by its participants in a way that can stand up to external validation. Such functions can help mitigate shallow or tokenistic considerations of intersectional need, and instead offer practical solutions including structured discussions or feedback channels, formal feedback loops between senior leadership, and action monitoring to keep senior leaders accountable.
In the context of climate and resource management, this could resemble community surveys, or drawing from employee groups to form rangatahi working groups with clear Executive and Board reporting lines. Rangatahi feel safe and empowered to share their views, and may help assess business proposals for the risks and opportunities specific to their communities. Rangatahi discussions may also be influenced by Board agenda, and the outcomes of discussions and change assessments are summarised for the Board as a standing agenda item.
What is your vision for the future of Aotearoa New Zealand or the industry you work in?
I work in Aotearoa’s banking sector, and believe that the banks should play a more proactive role in financing Aotearoa’s climate adaptation and mitigation efforts.
In January 2023, the US Federal Reserve published a paper reviewing the green financing commitments by large global banks. It found that the $1.2 trillion/year commitment by thirty of the world’s major banks will only amount to a quarter of the global financing needs to address the worst of climate change’s impacts.
Aotearoa’s banks must also come to the table and recognise the impact they have on the welfare of future New Zealanders and our neighbours. In my view, there are many opportunities for the banks to provide more extensive sustainable lending, and to reduce the process and cost of capital barriers for public good ventures to access funds.
Though we are beginning to move in the right direction, my main challenge is that current approaches to sustainable lending are defensive, primarily influenced by what a new exposure would look like on a bank’s books and less so by the social and environmental merits of the lending purpose.
Take for instance a farm site subject to high flood risk. A bank would be particularly sensitive to the default risk posed by likely flooding, and so would charge a higher interest rate than for a site with lower flood risk, or even reject the application outright. Pricing will steer prospective borrowers towards climate resilient choices, and the banks can continue to maintain commercially viable businesses as they are being compensated for the commensurate risk. This behavioural mechanism can lead to impact at scale, but with existing credit assessment approaches prioritising cashflow and profitability, the banks are unlikely to use traditional loans to finance the raft of sustainable ventures where financial return is neither immediate nor material, despite their non-financial benefits.
In Aotearoa’s funding environment, few options exist to access overseas capital and so must rely on traditional loan financing or grant funding. So how might our banks recognise their place of influence, and proactively bridge our domestic funding gap?
What would you like the leaders of Aotearoa New Zealand to do in order to help bring your vision to life?
I would to see leaders take greater initiative in committing to climate action, instead of relying on mandate to do so. There is great international subject matter expertise on climate resilience, and evolving best practice that organisations here can draw from, plus valuable mātauranga Māori and local community insights that can be called upon to understand domestic needs.
In the context of our banking leaders, I would like to see them collaborate across sectors and communities to develop a clear picture of external needs, while also understanding the internal capacity of their bank to extend sustainable lending more broadly. This would create clearer, more confident pathways for banks to design policies and products that are more accessible, and enable positive social and environmental outcomes.
The following areas may be places to start:
1 - Identify areas of need through public and subject matter expert engagement to define investment strategy
There needs to be greater public and pan-sector discourse about how expansive sustainability lending should be realised, as well as some consensus between industry, policy, and the scientific community as to the strategic climate impacts and projects that should be prioritised for funding. What should also factor into forming this consensus is the view of intersectional communities including emerging generations, who will ultimately bear the burden of climate related decision-making today.
2 - Define risk tolerances to enable a wider array of sustainable financing products
The banks could also define their risk appetites to extend sustainable credit at low to no interest. Doing so sets clear financial parameters, enabling riskier sustainable loan products, even credit allocation for public good, all while the banks maintain commercial viability as businesses. Pragmatically speaking, the banks should never make a habit of approving unprofitable loans well beyond their capacity. On balance, what does not receive nearly as much focus is the social risk if the banks contribute well below what they can actually tolerate in credit risk - thereby not maximising the social impact they potentially have.
In other considerations for risk tolerance setting, credit risk leaders might also contemplate how planetary boundaries and other ecological parameters might reconcile with a bank’s credit risk limits and thresholds. Doing so may help to bridge internal decision-making drivers with the needs of our environment, and thereby the needs of future generations.
What are your biggest concerns when it comes to the state of Aotearoa New Zealand?
My greatest concern is the impact of climate change and the need to build resilience to its effects. Take the recent North Island floods, estimated to cost the economy $466 million. As severe weather events are expected to become more frequent in the future, the vulnerabilities in our infrastructure and food systems are becoming clearer, as are the costs of climate adaptation.
As a young person, I am worried that Aotearoa’s failure to adapt will exacerbate socioeconomic inequality in the future, where barriers to affordable quality housing and nutrition may be higher than they are today. Moreover, as a migrant with overseas whānau and friends, I am also worried that in our unpreparedness, Aotearoa is at a reduced capacity to aid its international neighbours as the World Economic Forum estimates 1.2 billion people may be displaced by 2050 due to natural disasters and other weather-related events.
I retain some optimism for the conversations now happening across sectors, and in seeing organisations begin to prioritise climate change more strategically, hopefully leading to meaningful action. Aotearoa is a beautiful, liveable country and I hope it stays this way.