Australia launches Sustainable Finance Taxonomy

The Australian Sustainable Finance Institute (ASFI) has released the Sustainable Finance Taxonomy for the country. The document is a voluntary, science-based classification system designed to channel capital into economic activities that align with the country’s net zero and climate resilience goals. Developed in partnership with the treasury, regulators, industry, and civil society, the taxonomy aims to clarify and consistently define sustainable and transition finance. 

Let’s explore the Sustainable Finance Taxonomy for Australia in detail.

About the Sustainable Finance Taxonomy of Australia

Australia’s Sustainable Finance Taxonomy is a set of rules fundamental to the government’s Sustainable Finance Roadmap, designed to help mobilize private and public capital into climate-aligned activities.

The taxonomy offers a standardized lens to evaluate the environmental sustainability of economic activities. It supports Australia’s goal of reaching net zero emissions by 2050 while aligning with international frameworks like the Paris Agreement.

It covers:

• Mitigation: Activities that directly reduce greenhouse gas emissions
• Adaptation: Projects that build climate resilience
• Transition: Enabling investments in high-emission sectors to move toward alignment

Unlike prescriptive regulations, the taxonomy is voluntary, providing a flexible but credible tool for market participants.

Key aspects of the Australian Taxonomy

• The taxonomy aligns with international standards while tailored to Australia’s unique climate and economic structure. Addressing this aspect, ASFI CEO Kristy Graham said, “To unlock global finance for Australia’s key green and transition sectors, the taxonomy had to be internationally credible and locally relevant.”
• The criteria for taxonomy were developed through extensive stakeholder engagement and technical input, involving 25 cross-disciplinary experts in finance, science, policy, Indigenous rights, and human rights.
• The taxonomy follows a  “Do No Significant Harm” principle, meaning the sustainable activities must not undermine other environmental or social objectives. 
• Uniquely, Australia’s taxonomy embeds requirements for First Nations engagement and cultural heritage protection, setting a new global benchmark for inclusive, sustainable finance frameworks.
• Each sector on the taxonomy includes both:
   
  • Green activities: Already aligned with net zero
  • Transition activities: On a credible path toward alignment where no immediate alternatives exist.

The sectors covered by Taxonomy in Phase 1

The taxonomy initially targets six emissions-intensive sectors that are essential for achieving decarbonization and ensuring capital supports the transition:

Implementation and what's next?

The taxonomy is already being piloted by major institutions including ANZ, Westpac, NAB, CEFC, and HESTA, who are testing its usability in real-world investment workflows. To support international confidence and adoption, the Climate Bonds Initiative is expanding its certification program to align with the taxonomy’s criteria.

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