The Australian sustainable finance taxonomy project is a joint industry-government initiative to develop an Australian sustainable finance taxonomy.

About the Australian Taxonomy

Building on work done on sustainable finance taxonomies internationally, this project works with experts and stakeholders across the Australian financial system to design and develop an Australian sustainable finance taxonomy that is credible, usable and internationally interoperable, while reflecting the Australian economy and context. It coordinates with the development of taxonomies in other jurisdictions, across the Asia-Pacific region, the European Union, Canada and the United Kingdom. 

What is a sustainable finance taxonomy?

Both solutions and capital are required to support the transition to a net zero economy that is resilient and inclusive. Sustainable finance taxonomies are a set of common definitions for sustainable economic activities. These can then be used to credibly and transparently define sustainable investments. 

Taxonomies help to make it easier to identify opportunities, to create sustainable assets and activities and guide capital to support the achievement of Australia’s climate, environmental and social objectives. They also provide Investors with confidence and assurance of sustainability claims, enabling comparability between Investment products and portfolios and reducing transaction costs. 

A taxonomy would help to guide the transition of the economy, financial portfolios, companies and economic activities by providing clear and consistent definitions of what is classified as a sustainable activity and, given Australia's commitment to net zero by 2050, defining how economic activities will need to transition over time to continue to be classified as sustainable.

Taxonomy Project Governance

The Australian Council of Financial Regulators’ Climate Working Group (CWG) will oversee the development phase of the taxonomy project, as part of its role supporting the development and implementation of the Government’s Sustainable Finance Strategy.

ASFI, with endorsement from the CWG, has established a Technical Expert Group (TTEG) through an open expression of interest process. The TTEG comprises 25 experts in sustainable finance; whole-of-economy decarbonisation; climate and environmental science and policy; human rights; and Indigenous rights and perspectives. This group will provide strategic direction over, input into and endorsement of taxonomy products for consideration by Government.

ASFI will also undertake comprehensive stakeholder engagement as part of this work, including through the establishment of sector-specific advisory groups and a formal public consultation process.

Taxonomy Development Phase

The Australian Taxonomy Development Project commenced in July 2023. It is a joint industry-government initiative, led by ASFI in partnership with the Commonwealth Treasury, to develop an Australian sustainable finance taxonomy. Funding and partnership from the Australian Government reflects shared appetite across government, finance and industry for new frameworks to support sustainable finance markets in Australia.

The initial development phase will run for the next 12 to 18 months and will cover climate mitigation criteria for a minimum of three and up to six priority economic sectors and associated technical work on data requirements, methodology for incorporating transitional activities, Minimum Social Safeguards and a ‘Do No Significant Harm’ framework.

The six priority sectors are:

  • Electricity generation and supply (Energy)*;

  • Minerals, mining and metals*;

  • Construction and the built environment*

  • manufacturing/ industry;

  • transport; and

  • agriculture.

(* indicates the first sectors to be developed)

The sector coverage aligned with the six sector decarbonisation plans that the Australian Government is developing for the Australian economy to help mobilise the private sector investment needed to support net zero, invest in Australia’s ability to become a renewable energy superpower and achieve our other sustainability goals.

The development phase will provide a strong foundation for an enduring taxonomy framework, which may include permanent institutional arrangements for taxonomy development and maintenance, and the incorporation of finalised taxonomy criteria into regulatory architecture to support sustainable finance.

Further Reading

Frequently Asked Questions

  • A sustainable finance taxonomy is a set of definitions of economic activities and assets that contribute to key sustainability objectives.

    A sustainable finance taxonomy makes it easier to identify investment opportunities, create sustainable assets and activities, and helps guide capital to support the achievement of Australia’s climate, environmental and social objectives.

    It also provides the finance sector with greater confidence in and assurance over sustainability claims, enables comparability between investment products and portfolios, and reduces transaction costs.

  • Transition finance aims to mobilise capital toward initiatives that facilitate the decarbonisation of hard-to-abate sectors. Decarbonising these sectors will play a crucial role in reducing Australia’s national emissions, greening financial portfolios, and reducing systemic risk exposure across the economy.

    It is imperative that financial institutions have access to credible and consistent transition criteria that progressively steer economic activities toward taxonomy alignment and assist in mitigating the risk of greenwashing.

  • The first phase of the taxonomy’s development will run for the next 12 to 18 months. It will encompass the development of climate change mitigation technical screening criteria for between three and five priority sectors, and associated technical work on data requirements, ensuring minimum social safeguards and a Do No Significant Harm framework.

    The selection of priority sectors is underway, with input and final endorsement from the Council of Financial Regulators’ Climate Working Group.

  • ASFI’s mission is to realign the Australian financial services system so that more money flows to activities that will create a sustainable, resilient and inclusive Australia. ASFI does this by coordinating, facilitating and driving implementation of the Australian Sustainable Finance Roadmap. The development of a sustainable finance taxonomy is a key recommendation (Rec. 9) under the roadmap.

    ASFI’s membership spans the full breadth of the finance sector, including banking, investment, insurance, assurance and other intermediaries, such as data and ESG information. This means we are well placed to work at a system level to address systemic challenges across climate, environment and social aspects of the sustainable finance agenda.

    ASFI is not a peak body representing particular industry interests, rather it is an institute backed by representatives across the finance sector to drive implementation of the roadmap recommendations.

    As secretariat of the taxonomy’s development, ASFI will work with an international consortium of taxonomy and sustainability specialists led by global standard setter, the Climate Bonds Initiative, to prepare the technical products for the TTEG’s consideration, input and endorsement.

  • The ASFI Board had no direct or indirect involvement in the appointment of the TTEG.

  • The ASFI Board does not have decision-making powers in respect of the Taxonomy Project. Decision-making powers are vested in the TTEG, with oversight from the Council of Financial Regulators’ Climate Working Group.

    As a governance board, the ASFI Board has responsibility for strategy, budgets, organisational level risk and oversight of ASFI and is not involved in management decisions, such as the selection of the TTEG or the work that will be undertaken on the taxonomy’s development.

    More information on ASFI’s governance arrangements is set out in our Constitution, Board Charter and Code of Conduct, mission, vision and values and strategy and business plan.

  • The Council of Financial Regulators’ Climate Working Group decision minute on the constitution of the TTEG sets out the basis on which candidates were selected.

    The TTEG comprises a balanced cross-section of experts, including in sustainable finance; climate and environmental science and policy; circular economy; human rights; and Indigenous perspectives. All of these voices will play a critical role in the development of a fit-for-purpose taxonomy.

    Drawing on international experience, it is crucial that representatives from the financial sector provide input on usability and impact at the taxonomy’s design stage. If the taxonomy is not usable or fit-for-purpose, it risks not being adopted and could thereby fail to achieve its intended impact.

  • There will be opportunities for broad stakeholder feedback and engagement throughout the taxonomy’s development, including through an open public consultation process, to ensure a diversity of views are heard and accounted for.

    ASFI will run a public consultation process on the taxonomy’s development. Submissions received through this process will be made publicly available. There will also be sector and subject specific advisory forums through which key stakeholders, including representatives from industry, can provide input. ASFI will provide more information on ways to engage with the taxonomy development process soon.

    Decisions made by the TTEG and a Register of Interests will be published on a ASFI’s website.