Australia Introduces Taxonomy for Finance Sustainability
In a significant stride towards a greener economy, the Australian Sustainable Finance Institute (ASFI) has released the Australian sustainable finance taxonomy, a voluntary classification system for green and transition-focused economic activities. This system is designed to unlock global finance for Australia's key green and transition sectors.
The taxonomy, developed in collaboration with the government and the finance sector, is part of the Government of Australia's Sustainable Finance Roadmap, launched in 2023. It aims to enable financial markets to support the mobilization of private capital needed to finance the transition to a net zero economy.
Tailored to Australia's Economy and Social Context
Unlike taxonomies in the EU and UK, the Australian taxonomy is tailored to the country's economy and social context. It includes detailed criteria for sectors important to Australia's economy, such as minerals, mining, and metals, reflecting the country's resources and export profile. The taxonomy initially covers six priority sectors: agriculture and land, minerals, mining and metals, manufacturing and industry, electricity generation and supply, construction and buildings, and transport.
Social Safeguards and First Nations Engagement
ASFI uniquely incorporates minimum social safeguards as a fundamental component. This requirement includes adherence to essential social protections and standards, with a focus on engagement with First Nations peoples and cultural heritage management. This aspect is pioneering compared to other taxonomies, recognizing Indigenous rights and social impact explicitly.
Voluntary and Interoperable
Like taxonomies in the EU and UK, the Australian taxonomy is Paris-aligned and science-based, aiming to support green and transition finance that enables net zero ambitions. However, it is voluntary rather than mandatory, designed to provide confidence to investors and mitigate greenwashing risks within Australia and in comparison with other jurisdictions. The Australian taxonomy is also deliberately developed to be interoperable with leading global taxonomies, especially the EU's, supporting cross-border investment comparability.
Pilot and Certification
ASFI is actively piloting its taxonomy with a select group of financial institutions, including ANZ, the Clean Energy Finance Corporation (CEFC), Commonwealth Bank of Australia, HESTA, Moody's Ratings, NAB, Rabobank, Rest, and Westpac. The expansion of Climate Bonds Initiative's Certification Scheme aims to support standardization and convergence of global taxonomies, promoting market adoption and investor confidence.
The Climate Bonds Initiative will expand its Certification Scheme to include criteria, pathways, and measures in the new taxonomy. This expansion aims to support the standardization and convergence of global taxonomies, ultimately promoting market adoption and investor confidence.
In summary, while all these taxonomy systems share the common goal of facilitating sustainable finance aligned with global climate goals, ASFI’s taxonomy is distinguished by its focus on Australian economic sectors, explicit social safeguards including First Nations engagement, voluntary and collaborative development approach, and interoperability emphasis to link with international taxonomies. The Australian sustainable finance taxonomy is a significant step towards a greener future for Australia.
[1] ASFI (2023). Australian Sustainable Finance Taxonomy. Retrieved from https://asfi.org.au/taxonomy/ [2] Treasury (2023). Australian Sustainable Finance Taxonomy. Retrieved from https://treasury.gov.au/sustainablefinance [3] CEFC (2023). ASFI Taxonomy Pilot. Retrieved from https://cefc.com.au/asfi-taxonomy-pilot/ [4] Climate Bonds Initiative (2023). Certification Scheme Expansion. Retrieved from https://www.climatebonds.net/certification/expansion [5] European Commission (2021). EU Taxonomy. Retrieved from https://ec.europa.eu/info/business-economy-euro/green-finance/eu-taxonomy-sustainable-activities_en [6] HM Treasury (2021). UK Green Taxonomy. Retrieved from https://www.gov.uk/guidance/green-taxonomy-for-the-uk-economy
- The Australian Sustainable Finance Taxonomy, developed in collaboration with the government and finance sector, is uniquely tailored to Australia's economy and social context, incorporating detailed criteria for sectors important to the country, such as minerals, mining, and metals.
- Unlike other taxonomies, the Australian taxonomy includes minimum social safeguards as a fundamental component, with a focus on engagement with First Nations peoples and cultural heritage management, making it pioneering in recognizing Indigenous rights and social impact.
- The Australian taxonomy is voluntary and designed to be interoperable with leading global taxonomies, such as the EU's, to support cross-border investment comparability, promoting market adoption and investor confidence.
