Australia takes steps towards sustainable finance framework
Danielle Kutchel
A sustainable finance taxonomy would help guide capital flows into sustainable projects as Australia moves to net zero.
Australia is a step closer to a sustainable finance taxonomy, with the release of a new report outlining the key considerations that will inform its development.
A sustainable finance taxonomy is a set of definitions of activities or assets that are considered sustainable, and which can be used to define sustainable investments credibly and transparently.˜
An Australian Sustainable Finance Institute (ASFI) research paper considers the international context for sustainable finance and how this could inform Australia?s actions in this space.
See more: Sustainable finance is here to stay
The report makes a number of key findings, including that a sustainable finance taxonomy should be science-based and can be used to address greenwashing concerns by providing a framework for what sustainable finance looks like. While a sustainable finance taxonomy can apply to environmental, social and governance outcomes, the report found that there were many challenges associated with attempting to apply social and governance criteria including in usability, compliance costs and lack of available data.˜ The project was informed by an expert group of 55 members and observers of the finance sector, including from banking, consulting, superannuation, asset management, private equity and ESG markets. Speaking to Pro Bono News, executive officer of ASFI, Kristy Graham said a sustainable finance taxonomy would help Australian investors, banks and insurers ?guide more capital to support the achievement of sustainability objectives that [the country has] signed up to.? ?There's growing interest in investing in a way that creates real world outcomes for sustainability, whether that's climate, natural capital, [or] social impact. But there's not a consistent way that the finance sector is assessing the sustainability credentials of investment opportunities, of companies, of assets, of individual activities,? she said. ?That's what taxonomies are designed to do, to be a much more kind of credible, consistent, transparent and broadly used framework for measuring the real world outcomes of those things.? The taxonomy could also play a role as the federal government steps up its environmental and social commitments; a ?huge amount of finance? is going to be needed to support those, Graham said, and a sustainable finance taxonomy would ?provide that middle part of the architecture between high level policy ambition and financing real activities on the ground that will create real outcomes?.
See more: Sustainable finance is here to stay
The report makes a number of key findings, including that a sustainable finance taxonomy should be science-based and can be used to address greenwashing concerns by providing a framework for what sustainable finance looks like. While a sustainable finance taxonomy can apply to environmental, social and governance outcomes, the report found that there were many challenges associated with attempting to apply social and governance criteria including in usability, compliance costs and lack of available data.˜ The project was informed by an expert group of 55 members and observers of the finance sector, including from banking, consulting, superannuation, asset management, private equity and ESG markets. Speaking to Pro Bono News, executive officer of ASFI, Kristy Graham said a sustainable finance taxonomy would help Australian investors, banks and insurers ?guide more capital to support the achievement of sustainability objectives that [the country has] signed up to.? ?There's growing interest in investing in a way that creates real world outcomes for sustainability, whether that's climate, natural capital, [or] social impact. But there's not a consistent way that the finance sector is assessing the sustainability credentials of investment opportunities, of companies, of assets, of individual activities,? she said. ?That's what taxonomies are designed to do, to be a much more kind of credible, consistent, transparent and broadly used framework for measuring the real world outcomes of those things.? The taxonomy could also play a role as the federal government steps up its environmental and social commitments; a ?huge amount of finance? is going to be needed to support those, Graham said, and a sustainable finance taxonomy would ?provide that middle part of the architecture between high level policy ambition and financing real activities on the ground that will create real outcomes?.
