JENKINS The clearly stated objective of ASFI is to divert finance away from the short term and towards the long term so as better to address the needs of society and the economy.

This will have ramifications, and we are already seeing how it is affecting the balance sheet. For example, National Australia Bank’s climate-change strategy means we have seen a transition in exposures away from fossil-fuel generation, which is now sitting at around 30 per cent, to renewable generation, which is now around 70 per cent and increasing. Our balance sheet is transitioning towards a low-carbon mix in line with the bank’s strategy.

Longer term, the action of regulators and government to support a more sustainable economy with policy is imperative to ensure we meet the UN Sustainable Development Goals by 2030 and continue the progress being made towards meeting the Paris Agreement. It comes back to the fact that we all need to take complementary and collaborative actions to meet these goals.

THORPE The banks are dealing with transition of goals at the moment. Various institutions have made observations regarding where they are directing capital. This is playing out most obviously in the energy sector with the debate around electricity generation from coal versus renewable sources.

Trade-offs are already being made and I think the same story will begin to play out elsewhere. These decisions are potentially even more challenging in other sectors. There needs to be careful consideration as to what the unintended consequences of any action might be.

VAN NOT Long-term value versus short-term returns is not an issue for Westpac Banking Corporation (Westpac) as we already decline to fund these kinds of assets.

I chair Westpac Institutional Bank’s environmental, social and governance (ESG) risk committee, and we often decline transactions because they don’t satisfy criteria. This is sometimes on environmental grounds or because of a lack of transparency around practices or specific financial instruments involved.

It was never a decision between the short-term and long-term, though. It is about doing the right thing for all stakeholders – which means not only Westpac shareholders but society at large.

The question frames this topic as a risk, but it is also an opportunity for a bank like Westpac and the financial sector in general to design new initiatives and products to drive the transition. For example, Westpac has recently introduced wholesale green deposits. We are working intensively in Australia to develop sustainability-linked product solutions. The opportunities are very exciting.

CHEN Our approach to sustainable finance isn’t just about issuing or arranging sustainable products without looking at all the other activities we bank. In other words, we take a holistic view of sustainable finance that includes the opportunities and risks of banking companies from an ESG perspective across different time horizons.

Whether or not to bank a company will often come with trade-offs. But we make sure we look at each financing proposal from multiple angles and make decisions that balance what’s right for our customers, shareholders and communities.

TONKIN It is true that banks may ultimately have to decline to fund some assets that don’t fit with a clear vision of a sustainable economic future. But it will also be dangerous if they do not choose to follow this path. If they don’t, the transition will be more painful for consumers, companies and shareholders. The risk of doing nothing is no longer acceptable even in the short term.

ANZ’s chief executive, Shayne Elliot, wrote an article in 2017 called Australia’s Energy Certainty Opportunityin which he makes some comments around the opportunity for energy and emissions policies to be aligned for a well-managed transition to a low-carbon economy.

He wrote: “ANZ will help finance the transition but we need the right policies and greater certainty so we can play our part… It is in all our interests to move beyond old debates and seek a pragmatic solution to the problem at hand.”