Taxonomies make transition easier: ASFI

An Australian sustainable finance taxonomy will make it easier for capital allocators to find opportunities which support the transition, according to the head of the Australian Sustainable Finance Institute.

A guest at the 2024 Circularity Conference, ASFI Chief Executive Officer Kristy Graham told ANZ’s Head of Sustainable Finance Katharine Tapley the market is increasingly seeing the connection between circular economy and meeting climate objectives.

Many of those objectives rely on capital flowing to sustainable projects – a challenge made easier by the adoption of sustainable-finance taxonomies.

“Taxonomies are essentially classification systems,” Graham said. “They identify assets and activities that will support a net zero future in Australia.

“They’re being developed all around the world – there’s about 50 taxonomies globally that different countries are using – and they help financial institutions and other capital allocators get money towards the transition, and towards the climate transition in particular.”

{video}

The Australian Sustainable Finance Institute is working in partnership with Treasury to develop climate mitigation criteria for the taxonomy. It’s expected to be available for use by firms in mid-2025.

ASFI’s taxonomy work is focussed on six priority sectors, which complement the Federal Government’s broader plan for decarbonisation, according to Graham.

“The first thing to say is that the six sectors that we’ve developed screening criteria for, for the taxonomy, are the same six sectors that will be covered by the sector plans,” she said. “So that’s energy, the built environment, the mining sector, industry and manufacturing, agriculture and transport. So there’s very close alignment there.

“What the sector plans do is lay out very clearly, government policies and what government will do to support decarbonisation in those sectors.”

COP 29

Speaking ahead of COP 29, which has just wrapped up in Baku, Azerbaijan, Graham told Tapley the world had been watching Australia’s progress.

“There’s increasing global interest and recognition that the work that Australia has done domestically, on that transition methodology… is something that can inform and really drive global conversations around transition finance,” Graham said.

“The second area where there’s a lot of interest is the way that we have gone about defining green-mining criteria.”

The third, Graham said, was the “huge amount of international interest… [in] the way that we’ve integrated First Nations rights and heritage into the social safeguards criteria”.

Work began on the taxonomy in July 2023. Graham said ASFI is close to the end of the initial phase, which includes a public consultation process that will close in December.

“We welcome input, from anyone who will be a user, who has an interest, who sees value in the taxonomy, to provide input through that process,” Graham said.

Will Watson is a contributor at ANZ Institutional Insights