Australia's Treasury Department has released a Sustainable Finance Roadmap to empower companies and investors to make more informed investment decisions, effectively manage sustainability and climate risks, and support the transition toward net-zero goals. The government launched the roadmap on 19 June 2024.
Private equity or credit firms that follow sustainable investing practices and upskill in tandem with changing regulatory requirements will benefit by staying ahead of this roadmap and reducing the risk of regulatory action.
Let's explore the Sustainable Finance Roadmap in detail.
What is Australia's Sustainable Finance Roadmap?
The Sustainable Finance Roadmap for Australia is a comprehensive plan to reshape the country’s financial system to support a sustainable environment and a strong economy. The roadmap was developed by the Australian Sustainable Finance Initiative (ASFI) as part of a wider strategy by the Australian Government called the Sustainable Finance Strategy, which was released in November 2023.
Australia's Sustainable Finance Roadmap priorities
The Sustainable Finance Roadmap is structured into three key pillars, each having priorities addressing specific aspects of sustainable finance:
Pillar 1: Improve transparency on climate and sustainability
- Priority 1: Implementing climate-related financial disclosures.
Mandated climate-related financial disclosures for financial institutions and large businesses starting January 1, 2025, to increase transparency about climate-related risks and opportunities.
- Priority 2: Developing the Australian Sustainable Finance Taxonomy.
A sustainable finance taxonomy to aid Australia's transition to net zero and mobilize private capital towards sustainable activities — developed in partnership with the Australian Sustainable Finance Institute (ASFI).
- Priority 3: Supporting dependable net zero transition planning.
The Australian Treasury Department will develop and publish guidance on best practice transition plan disclosures before the end of 2025.
- Priority 4: Developing sustainable investment labels for products.
The government will establish consistent disclosure and label requirements for sustainable investment products to address investor confusion about sustainable finance products.
Pillar 2: Financial system capabilities
- Priority 5: Enhancing market enforcement and supervision.
The Australian Securities and Investments Commission (ASIC) will take a strong regulatory approach to greenwashing and sustainable finance misconduct by performing targeted surveillance, enforcement actions and support for climate-related financial disclosure requirements.
- Priority 6: Finding and responding to systemic financial risks.
The Council of Financial Regulators (CFR), led by the Australian Prudential Regulation Authority (APRA), will continue coordinating with regulators' responses and conduct Vulnerability Assessments for insurance and banking sectors to enhance the Reserve Bank’s analysis of climate impacts on the economy.
- Priority 7: Addressing analytical and data challenges.
At the Treasury Department's request, the CFR addresses key data challenges, such as corporate climate data accessibility and scope two emissions estimation. Findings are due in early 2025.
- Priority 8: Ensuring fit-for-purpose regulatory frameworks.
Australia’s principles-based approach to corporate governance obligations and financial regulation is fit for purpose. However, some stakeholders identified concerns with the annual superannuation performance test. The officials released a consultation paper in March 2024, aiming to make regulatory frameworks accordingly.
Pillar 3: Australian Government leadership and engagement
- Priority 9: Issuing Australian sovereign green bonds.
The Australian Government is issuing a well-designed and credible green bond program to help mobilize additional climate-aligned capital and support the development of Australia’s broader sustainable finance market. The bond line is $7 billion and will mature in June 2034.
- Priority 10: Stepping up Australia’s international engagement.
With all these measures, it is a fact that the Government is committed to enhancing Australia’s international engagement in sustainable finance. This will increase the country's participation in multilateral and regional forums and strengthen bilateral relationships to promote consistent global standards and frameworks.
Next Steps
According to the roadmap, the Treasury will begin detailed work on developing a sustainable investment labelling regime in early 2025. Legislation will be introduced in 2026, and the regime is anticipated to take effect in 2027.
While you’re here…
Guidelines like the Sustainable Finance Roadmap may require more detailed due diligence processes, risk monitoring, and ESG performance assessments and reporting to provide evidence for environmental and sustainability claims in marketing and labeling. Auquan can help in these areas.
Auquan automates and streamlines deal sourcing, due diligence, monitoring, sustainability, and compliance workflows so teams can move faster and more efficiently. Using advanced AI, Auquan generates material and sustainability insights on any entity worldwide — public or private — fine-tuned for your team’s investment and lending requirements.
Let’s explore how Auquan can help you and your team eliminate tedious and time-consuming manual data work and focus more on what you do best: making strategic decisions ahead of the market.
