Twelve signals that shaped Sustainable Finance in 2025, and what they mean for 2026.
2025 was a pivotal year for Australia’s sustainable finance system.
From ASFI’s vantage point — working across finance, government and industry — it became evident that sustainable finance is moving into a new phase, from development of frameworks to implementation. With stronger long-term policy signals now in place in Australia, the focus is moving to accelerating capital deployment for climate, nature and social outcomes.
This year-in-review reflects the twelve key system signals observed through ASFI’s engagement, analysis and collaborative work across 2025, highlighting where momentum is building, where challenges remain, and what these signals mean for 2026.
-
2025 marked a paradox in sustainable finance, as while high profile global alliances were challenged, financial institutions continued to focus on implementation.
The Net Zero Banking alliance and Net Zero Asset Managers Initiative shifted gears, and geopolitical headwinds fuelled a rise in “greenhushing” – where institutions became more cautious about action in public messaging but continued sustainability work behind closed doors.
However, as detailed in the 2025 progress tracker, beneath the surface momentum endured. Clean energy investment hit a record AU$12.7 billion, and sustainable debt markets expanded, with green bonds reaching US$564 billion globally. Australia’s sustainable loan issuance climbed 22% year-on-year to US$42 billion, and mandatory climate disclosure rules, effective from 1 January 2025, further entrenched climate risk integration across the financial system.
The collapse of alliances did not signal retreat, it marked evolution.
Implications for 2026
In the year ahead, we expect institutions to move from headline commitments to hard implementation, demanding stronger policy signals and credible transition pathways. The long-term trend in sustainable finance is clear; this is no longer a niche investment opportunity it is the backbone of future growth as we transition to a net zero global economy.
-
Despite heightened geopolitical and political headwinds, policy settings continued to evolve in ways that more directly supported the mobilisation of private capital for climate, nature and social outcomes.
Globally, the Taskforce on Net Zero Policy’s COP30 report challenged narratives of ‘climate fatigue,’ reporting the number of policy instruments in place across G20 economies to guide companies toward credible transition pathways has tripled over the past five years to over 1,000. Regional innovation and ambition in the Global South and Asia Pacific were also highlighted as examples of how policy is a key enabler of capital deployment, rather than a constraint.
In Australia, this trajectory was reflected in continued progress across sustainable finance reform. Mandatory climate disclosures commenced, an ambitious 2035 emissions reductions target was set, and a suite of national frameworks – including the National Climate Adaptation Plan and a Net Zero Plan with clear direction for key economic sectors – strengthened the overall policy architecture. As outlined in ASFI’s 2025 Progress Tracker, however, these policy signals remain fragmented, and stronger alignment is needed to mobilise capital at scale.
At the same time, the Coalition’s decision to abandon its net zero targets reinforced the ongoing importance of durable, bipartisan signals for investment confidence. ASFI and its members emphasised this point at the member delegation to Canberra – long-term policy certainty underpins the flow of capital. As analysis from the Network of central banks and supervisors for Greening the Financial System (NGFS) showed, any slowdown in coordinated Government-industry action risks costly delays, with just a three-year pause could double transition costs.
Implications for 2026
As the sustainable finance system continues to mature, the pace and coherence of policy reform will increasingly shape investment outcomes.
Policy will continue to evolve in 2026, with the Asia Pacific region remaining the global centre of gravity for transition finance and planning. In Australia, this creates a window of opportunity to further strengthen policy settings that support private capital mobilisation, including through the upcoming Safeguard Mechanism Review.
-
There was a decisive shift this year in sustainable finance in Australia, moving from design to implementation with the introduction of mandatory climate-related financial disclosures (CRFD) on 1 January, followed by the publication of the Australian Sustainable Finance Taxonomy in June.
A key component of the Government’s Sustainable Finance Roadmap, the release of the taxonomy followed a 20-month development process from July 2023 to February 2025, informed by broad-based collaboration and extensive public consultation and strategic oversight from the Australian Treasury and financial regulators.
Major banks, super funds and financial institutions moved quickly to pilot test the taxonomy in investment processes through ASFI’s Taxonomy Implementation Program. Outside of these market pilots, across banking, investment and insurance portfolios, early adopter institutions applied taxonomy criteria to live transactions and sector exposures.
Early market insights from the practical application of the Australian Sustainable Finance Taxonomy were then captured in Unlocking Private Capital for the Transition report, which was launched with the Assistant Treasurer, senior officials and ASFI members at Parliament House. The initial findings revealed a strong demand to expand the taxonomy into adaptation and resilience, step up international engagement to shape emerging global standards, and establish enduring governance arrangements.
Implications for 2026
The next phase of Australia’s sustainable finance system will be defined by implementation. The focus will shift from building frameworks, to ensuring they work consistently in real investment decisions.
As institutions move to apply the taxonomy at scale, the system will require clearer user guidance, improvements in data availability and use across disclosure, transition planning and labelled-debt markets.
-
Expectations for credible transition finance strengthened in 2025 as investors, regulators and financial institutions focused more sharply on the evidence, pathways and governance required to support Paris-aligned decarbonisation.
This shift was reflected in the growing scrutiny of transition plans and financing claims, with greater emphasis on the feasibility of transition pathways. Through ASFI’s Transition Planning Webinar, government, regulators, industry and institutional investors examined the building blocks of credible transition finance in an Australian context, including governance, capital allocation and sectoral constraints.
These themes were reinforced through ASFI’s policy submission to Treasury’s consultation on Climate-related transition planning guidance, and to the UK Transition Finance Guidelines, which recommended that transition finance frameworks need Paris-aligned safeguards, taxonomy-aligned capital expenditure and clear expectations about the structural feasibility of decarbonisation in different sectors.
ASFI also engaged with the Loan Markets Association and the Asia Pacific Loan Market Association (APLMA) as part of its work to improve clarity and credibility in global transition finance standards. The Transition Loans Guide, published in October, provides clearer parameters for transition-labelled lending and helps to reduce the risk of greenwashing in loan markets. This guidance is broadly aligned with emerging international best practice, including the approaches reflected in the Australian Sustainable Finance Taxonomy.
Implications for 2026
Markets are expected to differentiate between activities that genuinely support transition outcomes and those that risk overstating their contribution. Institutions will need to articulate not only their transition ambitions but the specific capital expenditure, governance and operational changes underpinning them.
-
In September the Australian Government, in line with advice from the independent Climate Change Authority, announced Australia’s next Nationally Determined Contribution (NDC) to the Paris Agreement setting a target of 62-70 per cent below 2005 levels by 2035.
As outlined in the 2025 Progress Tracker, achieving the upper end of the NDC target range would place Australia in a strong position, however current policies are insufficient to support the private investment required (p29). The Government’s own modelling projects that on current policy settings, emissions will be 51 per cent below 2005 levels by 2035 – 11 per cent shy of the lowest range of Australia’s 2035 NDC.
Alongside the target, three major national frameworks were released: the National Climate Risk Assessment, the National Adaptation Plan and the Net Zero Plan supported by six sector emissions reduction plans covering electricity and energy; agriculture and land; industry; resources; the built environment, and transport.
Implications for 2026
These announcements formed the most comprehensive update to Australia’s climate policy architecture in a decade and reinforced both the urgency of action and the scale of economic transition required.
However, for Australia’s emissions reduction target to translate from credible ambition to credible action and investment, an enhanced suite of policy measures will be needed across federal, state and territory governments.
-
In 2025, key changes to the Environment Protection and Biodiversity Conservation Act 1999 were made to promote better governance and stronger protection, as institutions, investors and policymakers increasingly recognised biodiversity loss and ecosystem degradation pose material financial risks.
ASFI was also commissioned by Government to explore how the taxonomy could expand to include nature-related objectives, with results published in Integrating Nature into Finance, a report guided by insights from senior officials and major agricultural lenders. This marked an important step toward integrating nature-related objectives into financial decision-making and supporting Australia's commitments under the Strategy for Nature 2024-2030, of which ASFI recently submitted guidance on.
ASFI’s Valuing Natural Capital program developed in collaboration with Macdoch Foundation’s Farming for the Future initiative released its final report in 2025 – From Insight to Action: Natural Capital in Financial Decision-Making – after two years fostering cross-sector alignment in land and agriculture sectors.
Further, growing international expectations contributed to momentum in this space, as ASFI and Chartered Accountants Australia New Zealand (CA ANZ) crafted a joint submission to the Taskforce on Nature-related Financial Disclosures (TNFD) that underscored the importance of ensuring a usable, scalable framework aligned with global reporting architecture.
Implications for 2026
Institutions will face increasing expectations to consider integrating nature into risk frameworks, governance processes and investment strategy, particularly where natural capital underpins asset values, productivity or supply chain resilience.
As global and domestic frameworks evolve, demand will grow for consistent nature-related data, science-aligned metrics and policy signals that support investable nature-positive outcomes.
-
Australia’s economic future became increasingly tied to the global transition in 2025, as policymakers, investors and industry leaders recognised that long-term prosperity will depend on our ability to compete globally for low-emissions goods, clean industrial inputs and green value chains.
This was reflected in the release of Maximising Australia’s green growth report, which revealed Australia’s ambition to become a renewable energy superpower will rely on both domestic decarbonisation and strategic action to build demand for Australian green commodities.
Over the course of the year, it became clear that the strategic use of public finance, including blended finance structures, is an essential component to crowding in private investment and building confidence in the long-term viability of Australia’s future green industries.
The was reinforced by ASFI Executives Nicole Yazbek-Martin, at the 2025 ANU Energy Update, and Purdie Bowden, at a FAST-P roundtable hosted by the Department of Foreign Affairs and Trade, Austrade, Export Finance Australia, the Monetary Authority of Singapore (MAS) and HSBC.
Implications for 2026
Green exports are no longer framed as an aspirational opportunity, but as a strategic necessity for economic resilience.
Australia’s shift toward a clean industrial export model will demand deeper coordination between government, finance and industry, and as green export become central to Australia’s long-term competitiveness, 2026 will require practical steps to convert ambition into investable markets.
-
Across ASFI’s engagements, it became clear that while mitigation remains essential, adaptation and resilience investment is now a parallel priority for Australia’s financial system. ASFI’s submission to the Climate Change Authority’s 2025 Issues Paper highlighted the key reforms needed to mobilise investment as physical risks intensify.
ASFI’s annual member delegation to Parliament House brought together senior representatives from across Australia’s financial sector with policymakers, Ministers and cross-bench leaders, and Assistant Treasurer Dr Daniel Mulino emphasised that sustainable finance is central to long-term economic opportunity, with discussions centred around the growing imperative to finance climate adaptation and resilience.
Backed by the Insurance Council of Australia and its members, “as a key priority for taxonomy coverage” (p12), the Australian Government’s National Adaptation Plan also committed to exploring “possible next steps for the Australian Sustainable Finance Taxonomy, including expansion to adaptation and resilience” (p24).
The release of the Actuaries Institute’s Mobilising Investment For Climate Adaptation report further strengthened the case for expanding the Australian taxonomy to include adaptation and resilience, revealing that natural disasters are already costing the economy $38 billion a year and forecast to rise to at least $73 billion by 2060.
Implications for 2026
Expectations will grow for national guidance on physical climate projections, integration of resilience into planning regulations and building codes, and the role of public finance in de-risking essential adaptation investment
After the release of the National Adaptation Plan, we increasingly anticipate a coordinated National Adaptation Action Agenda that clarifies roles across government, industry and communities and provides the additional detail needed to mobilise private capital at scale.
-
Blended finance, where public investment helps de-risk projects and crowd in private investment, proved its value as a key tool for decarbonisation and resilience in 2025.
In February, ASFI CEO Kristy Graham visited Singapore and Indonesia, where ASFI’s partners stressed that while global politics create headwinds for financial institutions with exposure in the US, the commercial fundamentals of sustainable finance do not change. Financial institutions continued to integrate sustainability-related risks into their decision making and allocate capital towards opportunities, including through blended finance structures.
In July the ACCC granted formal authorisation for the co-design of blended finance structures, giving ASFI the ability to work with financial institutions and governments on co-designing new blended finance structures.
This strengthened our ability to support collaboration in areas of clear public benefit, and to help turn climate, nature and social ambition into investment. ASFI’s submission on the design of the Net Zero Fund further highlighted the opportunity to improve the risk-return profile for private investors, so that its capital is truly catalytic and crowds in, rather than crowds out, private finance.
By embedding credible taxonomy-based definitions and adopting catalytic financing approaches in public investment vehicles, Australia can remain a competitive, investible economy that captures emerging green export opportunities.
Implications for 2026
The authorisation reflected a maturing regulatory view that collective action is essential in sustainable finance.
Initiatives like the FAST-P office show how blended finance can turn ambition into investment, not just at home, but across the region, and institutions can now contribute to joint problem-solving in areas such as scaling clean industry, funding adaptation, improving data quality and supporting cross-economy transition pathways, with greater clarity and within clearly defined guardrails.
-
In 2025, First Nations participation in Australia’s economy increasingly shifted from being framed as a social consideration to being recognised as a source of long-term commercial value. Policy reform, market analysis and investor research converged around a common theme: deeper, more credible First Nations participation can unlock capital, reduce project risk and improve commercial outcomes.
Legislative changes in February 2025 enabled Indigenous Business Australia (IBA) to access private capital, marking a significant shift in how First Nations economic participation can be financed, and prompting the launch of a new IBA 2030 strategy – to invest 5 to 7 billion between 2025 and 2030 to advance the commercial and economic interests of Aboriginal and Torres Strait Islander peoples and Nations.
ANZ’s Fuelling the Fire First Nations strategy 2025-2035, EY’s Investor Benefits of First Nations participation in clean energy projects report and the Responsible Investment Association of Australasia (RIAA)’s Charting the Path: Foundations for a scalable First Nations investment market in Australia report highlighted the scale of economic opportunity, and ‘systemic gaps in alignment, capability and institutional design’ constraining capital flows.
ASFI’s own work on First Nations Disclosures, in collaboration with the First Nations Reference Group and First Nations Affairs, further reinforced the commercial relevance of these issues, identifying major gaps in how First Nations rights, governance and material risks are currently reflected in corporate and sustainability reporting.
Implications for 2026
Across clean energy, infrastructure, land-based industries and capital markets, engaging with First Nations rights, governance and economic self-determination will continue to be recognised for the ability to strengthen project viability, reduce risk and support long-term commercial outcomes.
-
In 2025, as Australia made progress domestically, global partnerships became increasingly important for shaping capital flows, aligning standards and supporting economies across the region to transition.
Across ASFI’s international engagements, including the Australia-UK Roundtable and London Climate Action Week, the trend was consistently echoed: markets want fewer frameworks, with higher integrity. The UK’s decision to step back from developing its own taxonomy in 2025 reflected a strategic move to reduce duplication and rely instead on the EU Taxonomy, ISSB-aligned reporting, transition plans and product labels. In Europe, Omnibus reforms focused on improving usability, streamlining reporting obligations and easing friction for market participants.
This shift toward consolidation is also reflected in Australian peak-body positions on global reporting architecture. In a joint submission to the ISSB agenda priorities consultation, 15 peak organisations, including ASFI, emphasised the need for global alignment, reduced fragmentation and a strong focus on practical implementation of IFRS S1 and S2.
Australia’s role in the Asia-Pacific sustainable finance landscape also strengthened through ASFI’s engagement in the China–Australia sustainable finance workshop series, delivered across Canberra, Beijing and Hong Kong SAR. These sessions brought together regulators, banks, investors, academics and policy experts to explore areas of alignment between the Australian Sustainable Finance Taxonomy and China’s evolving green finance standards.
Implications for 2026
Global collaboration is becoming a defining capability for Australia’s sustainable finance system.. It is no longer about how many tools exist, but how well they work together.
Markets will expect simpler, more coherent sustainable finance architecture, supported by stronger credibility standards and interoperable systems that reduce cost and complexity while maintaining clear, science-based expectations for transition finance.
-
The power of private capital in driving Australia’s transition to net zero is increasingly being understood by parliamentarians and policymakers.
This year, two well received Mobilising Private Capital for Sustainability: Tools for Policymakers interactive training courses were delivered to policymakers from over 10 federal and state government agencies.
In October, Assistant Treasurer Dr Daniel Mulino further emphasised the importance of partnership between government and industry to build a financial system that supports the transition while maintaining Australia’s competitiveness.
“In order to progress action on climate change, it’s going to take the work of government and what we do as regulator and legislator, and the people and organisations in this room and what you do,” said Mulino.
Implications for 2026
Decarbonisation requires joint action and shared effort, which means Government and industry will need to continue to work together in 2026.
Consistent and expanded application of the taxonomy, strengthened interoperability across policy tools and clearer long-term signals will be essential to maintaining market confidence and unlocking the scale of investment needed for an orderly, credible transition.
Looking ahead, these signals point to a sustainable finance system that has firmly shifted from design to delivery.
In early 2026, ASFI will refresh its strategy to reflect this shift, drawing on these signals, and others emerging across our work programs, to shape the next phase of sustainable finance in Australia.
We look forward to engaging with our members and partners to inform this next chapter, and to working together to strengthen the policy settings, market practices and capital flows needed to deliver climate, nature and social outcomes at scale.