Australia, EU sustainable finance taxonomies show strong overlap: ISS STOXX

Strong overlap between Australia's and the European Union's (EU) sustainable finance taxonomies means companies and investors already reporting under the EU Taxonomy may be able to reuse data to assess alignment with the Australian Taxonomy, cutting duplicated effort, according to a new report.

Towards Cross-Taxonomy Alignment: Insights from Examining Interoperability between the Australian and EU Sustainable Finance Frameworks is published by ISS STOXX Sustainability in partnership with the Australian Sustainable Finance Institute (ASFI).

The report explores the extent to which existing EU Taxonomy data can be leveraged to support assessments under the Australian Sustainable Finance Taxonomy, examining interoperability at the activity, company, and portfolio levels.

"The report's findings are encouraging for Australian companies and investors seeking to operate in an increasingly interconnected sustainable finance landscape," ASFI executive manager of standards and market practice Nicole Yazbek-Martin said.

"The ability to leverage existing EU Taxonomy data to support Australian Taxonomy assessments has the potential to improve efficiency, reduce reporting burdens, and enhance comparability across markets.

"Equally important, the research offers practical guidance on the similarities and differences between the frameworks, helping market participants make more informed and confident decisions."

ASFI recently also launched a scoping project to expand Australian Sustainable Finance Taxonomy to climate change adaptation and resilience.

Of the Australian Taxonomy activities assessed, more than half have strong-to-exact EU Taxonomy activity proxies, comprising 35% classified as strong and 17% as exact. This degree of correspondence can reduce the need for investors to collect or estimate new activity-level information for every company, the report found.

"Sustainable finance taxonomies are developing across jurisdictions, yet differences between frameworks can create complexity for investors assessing alignment across markets," ISS STOXX head of sustainability business for APAC Julia Leske said.

"This analysis highlights how existing EU taxonomy data can support assessments under the Australian taxonomy, while helping investors understand where differences between the frameworks require further consideration."

Financial Standard is owned by ISS Market Intelligence, which is part of ISS STOXX.