Australia's green transition requires risk-taking mindset shift

Australia's transformation to a clean energy economy demands a fundamental shift in how public institutions approach risk and failure.

The challenge facing Australia's decarbonisation efforts isn't a lack of capital or technology – it's cultural resistance to accepting financial losses in pursuit of transformational change.

This emerged as a central theme during a high-level panel discussion at the IX Sydney Summit, where leaders from the National Reconstruction Fund, Clean Energy Finance Corporation, and NSW Net Zero Commission outlined the mindset shift required to secure Australia's future economy.

The innovation paradox

The National Reconstruction Fund, established 18 months ago with $15 billion in funding, faces a unique challenge in balancing public accountability with the need to take calculated risks on emerging technologies. Ian Learmonth, who has led the Clean Energy Finance Corporation since 2017, described the predicament facing government institutions in cleantech investment.

"We've been investing for over a decade and we invest in big things, infrastructure and wind farms. And we've been investing in venture capital as well," said Learmonth. "This is about taking risks. One in three of those companies will wither on the vine. You know, one's in the middle where you might get your money back, and then you're hoping for one or two really to shoot the lights out."

The tension between public accountability and innovation requirements was starkly illustrated by Martijn Wilder, Chair of the National Reconstruction Fund. "The first press conference I went to for the NRF, I said, we're going to lose money. And there was this sort of sigh in the room," he recalled. "But we're in the business of trying to catalyse things that are new and innovative and risky."

Portfolio approach to transformation

The solution, according to these leaders, lies in adopting private sector investment principles within public institutions. The National Reconstruction Fund operates under a mandate to achieve a 2-3% return above the government bond rate across its entire portfolio, allowing for strategic losses on individual investments while maintaining overall profitability.

Katerina Kimmorley, Commissioner at the NSW Net Zero Commission, highlighted the evolution required in government thinking. "I remember at my time at the CFC that the thing that we were most proud of was that we had never lost a dollar," she said. "But now that we are at the hard point, we need to be much better at losing money."

The Clean Energy Finance Corporation's track record demonstrates this approach can work. With over $33 billion in capital available, the organisation has made substantial profits while investing in 32 early-stage companies through its innovation fund, accepting that some will fail while others generate outsized returns.

Strategic sectors and competitive advantage

The discussion revealed clear thinking about where Australia should focus its industrial transformation efforts. Wilder emphasised the need for strategic positioning: "We can't compete with China on straight head-to-head solar manufacturing. So where are the areas that we can actually compete? What are the technologies that we have that we can do?"

Kimmorley identified two key opportunities: transforming iron ore processing using renewable energy and leveraging Australia's fossil fuel expertise for methane reduction technologies.

"We have an incredible opportunity to transform the way that iron ore is turned into steel in this country," she said. "If we can do that, the steel-making capitals of the world will be the ones with the cheapest electricity."

The institutional ecosystem

These organisations operate as complementary parts of a broader ecosystem. While the Clean Energy Finance Corporation funds renewable energy projects, the National Reconstruction Fund supports manufacturing of components that go into those projects. This coordinated approach extends across critical minerals processing, where the NRF has made equity investments in Northern Territory operations producing materials for wind farms, solar installations, and electric vehicles.

The challenge extends beyond individual projects to building entire industrial ecosystems. "If you want to build entire ecosystems, which is one of the things I've been pushing at NRF, is that we try to really think about this not on a project-by-project level, but an ecosystem level," Wilder explained.

Strategic implications

For sustainability executives and business leaders, this discussion signals a significant shift in how Australia approaches clean energy transformation. The availability of unprecedented capital – over $50 billion across these institutions – creates opportunities for private sector partnerships in emerging technologies. However, success requires alignment with government priorities and recognition that public institutions are now willing to accept higher risks for transformational outcomes.

The emphasis on ecosystem thinking suggests opportunities for businesses to position themselves within broader value chains rather than pursuing isolated projects. With Australia targeting 82% renewable energy by 2030, the next decade will determine whether the nation can transition from resource extraction to advanced manufacturing.

The leaders' emphasis on cross-sector technology applications – where innovations in one area can address challenges in another – suggests a more integrated approach to decarbonisation than previously seen. This creates opportunities for businesses with technologies that can serve multiple sectors simultaneously.

The discussion underscores that Australia's clean energy transformation is entering a new phase where calculated risk-taking by public institutions will be essential for achieving net zero targets while building competitive advantages in emerging global markets.