Aussie super funds welcome government backing for sustainable finance taxonomy

Australia's treasurer has announced the government will co-fund ASFI’s framework and introduce a green sovereign bond programme, with a first issuance expected next year.

The Australian government has announced it will co-fund the development of a national sustainable finance taxonomy – a decision welcomed by the country’s super funds.  

Efforts to develop a “green” taxonomy have been led by Australia’s financial sector via the Australian Sustainable Finance Initiative, an industry body created in 2019.  

The absence of government involvement in the work of ASFI had previously set it apart from similar initiatives in many other jurisdictions. However, following the election of prime minster Anthony Albanese in May, the Australian government has shown much greater interest in ASFI’s work, in addition to signalling a marked shift in climate policy. 

Speaking in September, ASFI’s head Kristy Graham told Responsible Investor that the Treasury has “definitely been able to be more proactive and active” in the work around the taxonomy, as well as being “engaged in ASFI’s work more broadly”. 

In December, the Australian government launched a consultation on mandatory climate disclosures, which closed in February, and revealed it would also unveil a wider sustainable finance strategy early this year. 

Speaking at an investor roundtable today, treasurer Jim Chalmers announced that the government would financially back the taxonomy efforts, as well as introducing a sovereign green bonds programme. Australia’s first sovereign green issuance is expected in mid-2024.    

Graham described the move as a “significant step forward”. “The absence of a sustainable finance taxonomy in Australia has been a significant barrier to investment in climate solutions, including clean energy, in Australia.” 

The announcement has also been welcomed by the country’s super funds. Deanne Stewart, chief executive at Aware Super, described the news as an “important step toward creating the common standards and certainty that are required to scale up institutional investment in the energy transition”. 

Sonya Sawtell-Rickson, chief investment officer at HESTA, agreed. “Establishing a sustainable finance taxonomy can support long-term investors like super funds better price risk and identify opportunities to invest more in Australia’s transition,” she said.  

Following nine months of work on the taxonomy, including input from its 56-strong technical advisory group, ASFI published 15 recommendations for feedback in December.  

A prior consultation had revealed that more than four-fifths of respondents supported the inclusion of a transition category in the taxonomy. The list of recommendations featured a “traffic-light colour coding framework” to distinguish green, transition and excluded activities. 

Last month, ASFI published an update on its taxonomy work in a “framing paper”, revealing that there was “broad consensus” for its draft recommendations among the 56 respondents.