There are a number of reasons for this, none of them individually definitive, but all pointing in the same direction: in brief the financial markets have already effectively tightened conditions as a result of more costly funding; the New Zealand private sector is reducing debt and cautious about new borrowing; most borrowers are on shorter duration mortgages and the steeper yield curve does not much encourage lengthening this; increasing policy rates in the shadow of Australia should be easier than being a world leader; and, finally, we believe there may be alternative ways of influencing over-exuberant bank lending through macrofinancial policies.
An alternative – or complement – could be to provide public subsidies to green firms and investments; this could be considered if a fast green transition were to generate high social costs – this is probably where the E and the S of the ESG acronym are most closely related.14 Be that as it may, ESG awareness should not end up in a wealth transfer from sustainabilityconscious investors to other operators; in such a scenario the global warming problem would not be tackled, while society could be lulled into a deceptive conviction of doing something about it.