Other legislation, policies and governance events
PGPA Act
As a corporate Commonwealth entity, CEFC activities are governed by the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and its subordinate instruments.
The PGPA Act imposes various duties, responsibilities and accountabilities on the CEFC Board, both as a collective and as individuals, and on the CEFC Executive and employees. Note 1 to the Financial Statements contains information about how the PGPA Act impacts the financial governance of the organisation and the preparation of the accounts. There were no significant issues of non-compliance with finance law identified and reported to the responsible Ministers in 2020–21.
Modern Slavery Act 2018
As an Australian-based and operating entity with annual consolidated revenue exceeding $100 million, the CEFC is required to comply with the Modern Slavery Act 2018.
Under section 16 of the Act, we report annually on modern slavery risks in our operations and supply chains, and actions taken to address these.
The first Board-approved CEFC Modern Slavery Statement, for the period ending 30 June 2020, was provided to the Minister for Home Affairs prior to 31 March 2021, as required under section 13 of the Act. The Statement considered modern slavery risks across three main areas of CEFC activity. These were procurement, investment activities and collaboration arrangements with external parties.
The second CEFC Modern Slavery Statement, relating to the reporting period ending 30 June 2021, will be provided to the Minister for Home Affairs on or before 31 December 2021 as required.
Other government policy
The CEFC works closely with the Department of Industry, Science, Energy and Resources and several portfolio agencies, including ARENA, to contribute to the delivery of Australian Government policy initiatives relating to emissions reduction.
In 2020–21, specific examples included the representation on the Technology Investment Advisory Council and the formal secondment of CEFC employees to the Underwriting New Generation Investments program.
As a corporate Commonwealth entity the CEFC is not formally bound by other Australian Government policies, including the Public Service Act 1999. The CEFC nevertheless considers policy guidance issued by central authorities having regard to particular CEFC circumstances, in areas such as workplace bargaining and remuneration. In 2020–21, the CEFC aligned with wage restraint guidelines provided by the Australian Public Service Commission.
A review of performance bonus arrangements for Commonwealth senior executives was initiated by the Assistant Minister to the Prime Minister and Cabinet in November 2020. The scope of the Review included existing performance bonus arrangements for SES- level Australian Public Service employees, as well as officials of corporate Commonwealth entities (such as the CEFC) and Commonwealth companies. Agencies received an interim report and initial draft guidelines in March 2021, and a final draft in June. The final document was issued in August 2021, just after year end. The Performance Bonus Guidance: Principles governing performance bonus use in Commonwealth entities and companies (2021), will take effect in the 2021–22 year and will be reflected in relevant CEFC decisions. Refer Appendix G.
Other statutory requirements
As a corporate Commonwealth entity, the CEFC complies with a range of other statutory reporting requirements. An Index to these other Annual Reporting Requirements can be found at Appendix A.
Independent review of investment decision
On 2 March 2020, the Minister for Energy and Emissions Reduction requested the Secretary of the Department of Industry, Science, Energy and Resources to prepare an Independent Review of the Clean Energy Finance Corporation decisions in relation to RateSetter (since renamed Plenti).
The review considered:
- Whether the CEFC complied with the CEFC Act in awarding seed funding to RateSetter in 2016–17
- The role of the CEFC in the appointment of RateSetter as delivery partner for the SA Home Battery Program and the pilot NSW Empowering Homes Program
- Arrangements for current and future projects between the CEFC and RateSetter.
In its final report, released on 29 September 2020, the review found that:
- All CEFC project and investment decisions relating to RateSetter complied with its legislative obligations and Investment Mandate
- There was no evidence the CEFC facilitated improper preferential treatment for RateSetter around the SA and NSW programs
- There was no evidence to suggest arrangements for current and future projects between the CEFC and RateSetter were inappropriate.
Having made no adverse findings, the review made no recommendations.
ANAO performance audit
The Australian National Audit Office (ANAO) undertook a performance audit “to assess the effectiveness of the selection, contracting and ongoing management of investments by the CEFC and the extent to which the CEFC is meeting its legislated objective”.
The Auditor-General Report No. 26 of 2020–21 Investments by the Clean Energy Finance Corporation, issued on 17 December 2020, found that the CEFC:
- Has suitable arrangements in place to assess and approve investments and for their ongoing management
- Has met its legislative requirement to invest at least 50 per cent of funds into renewable technologies
- Has not yet met either of the target medium to long-term benchmark rates of return set by the Investment Mandate
- Has largely effective risk management processes in place
- Has facilitated increased funding into the clean energy sector, but the extent is unclear.
The CEFC welcomed the ANAO report and has since implemented or substantially progressed all but one of the ANAO recommendations. The CEFC has provided advice to the ANAO with respect to its view on the remaining matter. Refer Figure 16.
| ANAO recommendation | CEFC response | |
|---|---|---|
| 1 | The CEFC develop a more a comprehensive statement of its investment policies in regard to environmental, social and governance (ESG) issues in order to meet the requirement of section 16 of the Investment Mandate. | Agreed and implemented |
| 2 | The CEFC include in its annual performance statements a carbon abatement capital efficiency metric as an additional performance measure. | Agreed and implemented |
| 3(a) | To help decision-makers take account of all mandated requirements when assessing investment proposals, the CEFC include in its screening documentation for all projects: specific consideration of the potential effect on other market participants and the efficient operation of the Australian financial and energy markets. | Agreed and implemented |
| 3(b) | To help decision-makers take account of all mandated requirements when assessing investment proposals, the CEFC include in its screening documentation for all projects: a comparison of the rate of return with the relevant benchmark average rate of return in the Investment Mandate. | Not agreed The CEFC analyses investment returns on an individual versus portfolio basis. The Portfolio Benchmark Return is defined in the Investment Mandate and then managed consistently on a portfolio basis. It is the view of the CEFC that this is not an integral part of each individual investment decision. Individual investment decisions more appropriately reference the relevant market-equivalent rate of return and the maximum rate that can be achieved while ensuring achievement of the appropriate public policy outcome. |
| 4 | The CEFC benchmark its performance in terms of clean energy outcomes and leverage against one or more other “green banks”. | Agreed and implemented |
| 5 | The CEFC: a. Ask responsible Ministers to clarify in the Investment Mandate the intention of the requirement in subsection 14(2) that the CEFC make available up to $1 billion of investment finance over 10 years for the Sustainable Cities Investment Program b. In reporting on investments included in each fund or program, include amounts that have been included in other funds or programs. | Agreed and implemented |
| 6 | The CEFC document procedures for calculation of benchmarks and actual rates of return against the benchmarks and ensure that the calculation spreadsheets include references to all source data. | Agreed and implemented |
| 7 | The CEFC keep responsible Ministers informed of action it is taking to meet the target rates of return and any concerns it has about its ability to achieve the target rates. | Agreed and implemented |
| 8(a) | The CEFC develop a metric that provides an aggregate estimate of risk at the portfolio level. | Agreed to continue to investigate the feasibility of developing such a metric, given the complexities of having a combined debt and equity portfolio. Work is in progress. |
| 8(b) | The CEFC include in the quarterly Enterprise Risk Performance Report a specific statement as to the CEFC’s assessment of risk against the mandated requirement to develop a portfolio that in aggregate has an acceptable but not excessive level of risk. | Agreed and implemented |