Mr. David Owens:

I am grateful for the opportunity to speak to the committee today. We are pleased to be invited and to contribute to the deliberations of the committee on foot of the publication of the citizens’ assembly report. I am accompanied by my colleague, Seán Judge.

I am the head of the climate and sustainable finance unit in the Department of Finance. Our main area of responsibility relates to overseeing the Department’s input to national and international climate priorities, as well as with regard to sustainability considerations in the financial services field. The climate unit was established some three years ago in line with the increasing focus on climate issues across Government. The unit aims to progress and support the integration and mainstreaming of climate action across the Department’s key functions. In addition, in line with the programme for government requirement that each Minister makes climate action a core pillar of their Department’s strategies, the Department of Finance statement of strategy now includes a climate-related strategic objective, namely, Promoting environmentally sustainable economic progress.

Traditionally, as members will know, the primary focus of the Department of Finance in supporting climate action has been through the taxation system, with a number of environmentally progressive elements to Ireland’s taxation regime already in place.

However, in recent years the remit is expanding. This expansion includes advancing our macroeconomic and fiscal analysis to aid understanding of the effects of climate policies, introducing green budgeting analysis of the taxation system and supporting green bond issuance.

As I mentioned, one aspect of my areas of responsibilities relates to managing the Department of Finance's input into national climate policy and related areas. This has included and will include engagement with the development of Ireland’s fourth national biodiversity action plan, which we understand will be published shortly. In support of the biodiversity action plan, the Department of Finance has committed to include biodiversity in its work on climate and sustainable finance, including taking it into account in financial services, multilateral development financing and fiscal policymaking, as appropriate.

While engagement on biodiversity issues is a new area for the Department of Finance, as it is for many State actors, the importance of addressing the challenge of biodiversity loss, as well as taking advantage of the opportunities associated with the conservation and restoration of nature is acknowledged, as is the mutually reinforcing relationship between biodiversity and climate change, as was discussed in the previous session. We know biodiversity contributes to and enhances climate mitigation and adaptation, while climate change can lead to degradation and loss of biodiversity and the diminution of ecosystem services.

The important work of the citizens' assembly through its recommendations and report on biodiversity loss is also recognised. As I said, we are pleased to assist the joint committee and we will, of course, advise the Minister and the Government on those areas relevant to the Department of Finance.

I would like to set out a number of areas of work that are under way which are of relevance to biodiversity, not all of which are based on raw economic return considerations. First, in terms of the area of sustainable financial services, at an EU level the Department oversees Ireland’s engagement with the EU taxonomy for sustainable economic activities, which is a very important piece of work in defining what economic activities are sustainable, and in guiding and encouraging investors to identify and channel money towards genuinely green investments. As committee members may be aware, the taxonomy is a classification system which specifies technical, science-based criteria for assessing whether specific economic activities make a substantial positive contribution to climate change, do no significant harm to the environment and meet specified minimum safeguards.

Although it is voluntary for companies to spend or invest in taxonomy-aligned activities, financial institutions and certain companies in scope must report on the extent to which their business is aligned with the taxonomy’s standards. In this way, the taxonomy has an increasingly influential role to play in guiding and mobilising investments in activities to achieve carbon neutrality. I will also highlight that as taxonomy alignment reporting becomes embedded in the private sector, it can be expected that it will also become increasingly important for the public sector.

While the delegated acts in terms of climate change mitigation and climate change adaptation have applied since January 2022, earlier this year the European Commission adopted a delegated Act which sets out criteria for the remaining taxonomy environmental objectives, including for the protection and restoration of biodiversity and ecosystems. This sets out conditions for activities such as the conservation of habitats and species.

Ireland has been a strong supporter of the taxonomy and of science-based requirements throughout its development. We, in the Department, will continue to engage constructively during negotiations on the delegated act, which are expected to be concluded before the end of the year.

The Minister for Finance announced on budget day that he would establish two new funds called the future Ireland fund and the infrastructure, climate and nature fund. His announcement also represents an important development in terms of allocating funding for biodiversity and nature initiatives.

The future Ireland fund will be maintained over the longer term with the return on the fund used to support Government expenditure for future generations. The fund will help to deal with future recognised expenditure pressures, including ageing, climate, digitalisation and other fiscal and economic challenges.

The infrastructure, climate and nature fund, ICNF, will help to ensure that the State has resources available in a future downturn to support capital expenditure through the cycle. This would avoid generating backlogs in capital projects due to a lack of spending during possible downturns. The ICNF will also have a climate and nature remit worth up to €3.15 billion. The aim of this is primarily to help the achievement of the national carbon budgets and sectoral emissions targets through the delivery of capital projects. The fund is designed to be used where it is clear our climate targets are in danger of not being reached.

On 12 October, the general scheme of a Bill to provide for the establishment of both funds was published. The general scheme has also been referred to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach for pre-legislative scrutiny with a view to progressing the legislation as soon as possible.

In addition, EU programmes will be an important source of funding for biodiversity, with the multi-annual financial framework 2021-2027 to provide a minimum annual spend on biodiversity objectives, starting at 7.5% next year and rising to at least 10% in the last two years of the programme, 2026 and 2027.

I mention also the important role of the National Treasury Management Agency, NTMA, which is a body under the aegis of the Department of Finance, in contributing to the funding of biodiversity in tandem to supporting the broader green financing needs of the State. In particular through its funding and debt management function, the NTMA, on behalf of the State, has issued Irish sovereign green bonds, ISGBs, to the value of more than €10 billion, with the proceeds allocated against eligible green projects. Eligible projects are identified across six broad categories, one of which relates to environmentally sustainable management of living natural resources and land use. As outlined in the 2022 ISGB allocation report, eligible green expenditure by the State on forestry and bioenergy was €74 million, with an allocation of €50 million made against this, in line with all other eligible green programmes. The Ireland Strategic Investment Fund, ISIF, managed by the NTMA is also supporting biodiversity, with ISIF’s impact investment strategy including the themes of investments, climate, scaling indigenous business and food and agriculture. A key part of ISIF’s food and agriculture strategy is focused on developing solutions in the land use, land use change and forestry, LULUCF, sector and in the circular and bio economies covering forestry, anaerobic digestion, carbon farming and alternative crops. This will involve collaborations with other State agencies, Irish corporates and international funds. As for ISIF's investment commitments to date, the fund has more than €100 million committed to forestry funds, which at the end of 2022 had 12,500 ha of forestry, of which 1,700 ha was created from bare land, thereby contributing to our afforestation targets. These forests incorporate the planting of native tree species at a level of 20% to 30% of afforestation.

The Strategic Banking Corporation of Ireland, SBCI, also launched the growth and sustainability loan scheme on 19 September. Some 30% of the €500 million loan guarantee scheme is targeted at SME investment in environmental sustainability measures and is being given priority. The purpose of discounted loans provided under this element of the scheme is to address climate change, environmental and biodiversity issues. It should be noted that the growth and sustainability loan scheme is open to SMEs and small mid-caps, including farmers and fishers.

On fiscal policy and environmental taxation, as I mentioned earlier the primary focus of the Department in supporting climate action has traditionally been through the taxation system. There is a suite of environmentally-progressive elements to Ireland’s taxation regime already in place including the carbon tax regime, as well as numerous measures to incentives the uptake of electric vehicles. In terms of measures more directly linked to biodiversity, under section 232 of the Taxes Consolidation Act 1997 profits or gains from the occupation of woodland in the State, which is managed on a commercial basis and with a view to realising a profit, are exempt from income tax and corporation tax. The Department of Finance fully recognises the taxation system, operating in conjunction with other measures, provides an important climate action policy lever. Fiscal measures which help to incentivise the use of greener fuels and technologies and support a move away from more polluting fossil fuels play an important role in the journey to a carbon-neutral economy. Air pollution, including emissions of carbon dioxide, nitrogen dioxide and sulphur dioxide contribute to biodiversity loss and, therefore, measures which aim to reduce these emissions can contribute to tackling biodiversity loss. It is recognised that many fiscal measures aimed at emissions reductions, while not specifically targeting biodiversity, will contribute to mitigating climate change and improving air quality, which ultimately has knock-on benefits for biodiversity. However, it is important to note field expertise is required to ascertain the specific impacts and benefits of these policy measures on biodiversity. This moves beyond the remit of the Department of Finance. That said, we are of course available to provide input on the operation of current taxation measures. If the committee wishes to present expert-informed specific tax policy proposals, the Department is happy to engage and evaluate these measures.

My final point is on multilateral development banks. Through Ireland’s membership of multilateral development banks, the Department of Finance will continue with collaborate with partners to ensure biodiversity is included as a priority within their respective policy programmes. Of note, the Department welcomes the recent broadening of the World Bank’s mission to explicitly focus on biodiversity and nature as a global priority to deliver a liveable planet.

Support from the European Investment Bank, EIB, has also assisted helped to establish Peatland Finance Ireland, PFI, which is developing a peatland standard to standardise the contributions made by investing in peatland restoration to carbon storage and sequestration.

I thank the Chair. I am happy to have the statement published and Mr.Judge and I are pleased to listen to committee members’ views and take questions.