Australia's sustainable finance taxonomy launches

The Australian Sustainable Finance Institute (ASFI) has launched the nation's sustainable finance taxonomy and will be trialled by the likes of HESTA, Rest, Westpac and Moody's Ratings.

The sustainable finance taxonomy aims to support the credible allocation of capital towards Paris-aligned activities by strengthening investor confidence in low-emissions investment claims, reducing the risk of greenwashing and improving the comparability of investment products and sustainability disclosures.

"The Australian taxonomy will provide a common standard for green and transition finance in Australia, helping to accelerate the allocation of capital towards activities that enable Australia's net zero ambitions," ASFI said.

The taxonomy, which is voluntary, covers decarbonisation in the sectors of agriculture, minerals, materials and mining, manufacturing and industry, electricity generation and supply, transport, and construction and building.

Other major financial institutions such as the Rabobank, NAB, ANZ, Clean Energy Finance Corporation and Commonwealth Bank (CBA) will pilot the taxonomy that will run for several months.

ASFI chief executive Kristy Graham said the release of the taxonomy marks a transformative moment for Australia's sustainable finance market and a key achievement under the government's Sustainable Finance Roadmap.

"The 20-month development process has been rigorous and collaborative, led by an independent expert decision-making body with strategic oversight from the Australian Treasury and financial regulators. It reflects deep technical input and extensive engagement across finance, industry and civil society," she said.

Rest general manager for responsible investment and sustainability Leilani Weier said the sustainable finance taxonomy should become one of a number of tools that investors use to support the classification of assets in investment portfolios.

"With two million members and one million under 30, many of Rest's members are decades from retirement. The taxonomy is one lever that we can use over time to help us and our members understand the sustainable finance assets in our portfolio," she said.

Climate Bonds Initiative (CBI), which is an ASFI technical development partner, said it will expand its certification scheme to include criteria, pathways, and measures in the Australian taxonomy that are consistent with the Climate Bonds Standard.

"Australia's Sustainable Finance Taxonomy is a shopping list of investments for the future. Climate Bonds Certification will now be able to confirm adherence to both the Australian and the Climate Bonds Taxonomies. This will support investor confidence in the credentials of sustainable financial investments," CBI chief executive and co-founder Sean Kidney said.