Aussie finance sector prioritises green taxonomy in 2022

Australian Sustainable Finance Initiative sets out workload for the year, including biodiversity focus.

The Australian Sustainable Finance Initiative (ASFI), the financial sector-led sustainability body, has announced that the development of an “Australian Sustainable Finance Taxonomy” is top among its priorities for 2022.  

Biodiversity, specifically providing a “well-coordinated Australian voice” in the “development and implementation” of the Taskforce on Nature-related Financial Disclosures (TNFD), was the body’s second item in that list. Yesterday, RI reported that the TNFD has published a first-of-its-kind guidance aimed at tackling the financial risks posed by nature loss.  

ASFI, which was set up in 2019 by the Australian financial sector, recommended that Australia develop a ‘green’ taxonomy in its 2020 roadmap. In that document, the body stressed that the proposed framework should “align and harmonise with emerging international sustainable finance taxonomies,” albeit “while also reflecting the unique characteristics of the Australian market”.    

Several other resource intensive economies are also moving towards establishing their own taxonomies, including Canada, which was meant to release its “transition taxonomy” before the end of last year, but the framework has not yet appeared.  

Speaking on a panel on the topic at RI Canada last September, Peter Johnson, Director of Sustainable Finance at Scotiabank, told delegates that, “[w]e have a very different definition of transition in Canada than perhaps the Europeans or other groups.” “Our definition of transition that we’re working from is the reduction of greenhouse gas emissions,” he added.   

There is concern from some quarters that the proliferation of regional frameworks will undermine the primary objective of a taxonomy – setting common definitions of ‘green’ and reducing confusion for investors and companies.    

Last year, the International Platform on Sustainable Finance (IPSF), an EU-convened intergovernmental body, set up a working group on harmonising taxonomies.  

In its 2020 roadmap, ASFI recommended that Australia should join the IPSF through a “relevant public authority” to “enhance coordination and alignment with international sustainable finance initiatives, and to promote best practice in sustainable finance”.  

Unlike most national roadmaps, Australia’s was developed by the private sector without input from the national government; although the Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) are observers to the initiative’s work.  

In its update, ASFI revealed that its new Advisory Committee sees APRA, ASIC and the Reserve Bank of Australia (RBA), as well as the NSW Government, represented on it, “demonstrating the strong interest from Government in ASFI’s work,” according to the body.   

Last year, ASFI registered as a company in Australia as part of its move to become a permanent body. In October, it hired Kristy Graham, formerly Director of Development Finance at the Australian Department for Foreign Affairs and Trade, as its inaugural Executive Officer.   

The new CEO of the Principles for Responsible Investment (PRI) David Atkin is on ASFI’s Steering Committee. Atkin was previously chief of Australian super fund CBUS.