Major superannuation funds are calling for governments to make it easier to invest in what comes next for regional Australia where emissions-intensive industry still dominates.
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The Investor Group on Climate Change (IGCC) on Thursday released a report that sets out how governments and business can attract capital and make a transition that suits each community.
The group's members manage more than $30 trillion and include Australia's largest super funds and specialist investors.
The Hunter Valley in NSW, the Latrobe Valley in Victoria, Collie in Western Australia and the Bowen Basin in central Queensland are identified as being on the front line, with coalmining, coal-fired power generation and other high-polluting industries.
IGCC managing director of policy Erwin Jackson told AAP it was important to take it step-by-step in priority regions and industries, with workers also involved in designing their futures.
He said the new national Net Zero Authority should be a "one-stop shop" for investors to fix planning bottlenecks when dealing with various levels of government.
"Australia's successful path to net zero goes through a handful of critical regions that have hosted our heavy-emitting industries," he said.
"Institutional investors currently struggle to identify opportunities in transition regions that meet their capital allocation criteria."
But with the right policy signals, Australia could have thriving green iron production, clean energy exports and a host of other new businesses by 2035, he said.
Schools, hospitals and other social services, along with infrastructure to deal with worsening climate damage, will also be critical to developing liveable communities, according to the Investing in Australia's Vital Regions report.
Roughly two-thirds of Australia's export earnings are generated in regional areas, including mining, manufacturing, agriculture, tourism and services.
Rapid decarbonisation of these industries will be crucial to meeting national emissions reduction targets, but a failure to share the costs and benefits could erode public confidence and increase the cost of the energy transition, the report warns.
Some $420 billion is needed to transform Australia's carbon-rich economy and achieve net zero emissions by 2050, recent analysis found.
Superannuation funds must act in the best financial interests of their members and can allocate capital towards environmental or social initiatives that have quantifiable, long-term benefits.
But these remain the exception and represent a small proportion of available private capital, the report says.
Until this year, Australia's long-standing "climate wars" have been a major barrier for institutional investors with no clear signal to justify taking the risk on long-term investments.
Regional transition bodies such as the Collie Recovery Unit, the Latrobe Authority and the national authority will play a key role in unlocking capital, the report says.
Government intervention is needed to support investment in critical sectors such as climate innovation and adaptation that would otherwise fall short of meeting the returns required by many big investors.
Funds surveyed said advanced manufacturing and climate adaptation (82 per cent), renewable energy (73 per cent), and critical minerals mining and processing (73 per cent) were top picks for beginning or increasing investment.
Almost two-thirds backed green manufacturing of hydrogen, ammonia, steel and iron (64 per cent), decarbonisation and energy efficiency in other industrial sectors (64 per cent), and green transport such as electric vehicles and sustainable aviation fuel (64 per cent).
Reforestation, coastal systems, biodiversity and wetlands (64 per cent) ranked ahead of allocating capital to ports, rail and renewable hubs (55 per cent).
Australian Associated Press
