CEFC case study: Using the Australian Taxonomy in Net Zero Investment
Clean Energy Finance Corporation (CEFC)
Organisation Type
Specialist Investment Vehicle
Sustainability Reporting
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Experience piloting the Australian taxonomy
CEFC approached the taxonomy pilot with two goals:
to understand how we could leverage the tool to support our investment activities, and
to gauge how the market and co investors would interact with the taxonomy and apply it to real world decarbonisation at a sectoral level.
The pilot presented a unique opportunity to engage with other financial institutions on common challenges in adopting the taxonomy in practice and, within that, catalyse investment in 1.5°C aligned activities across the economy. We saw this as an opportunity to learn from the deep research, scenarios and applied methodologies that comprise the taxonomy.
CEFC prepared a series of test use cases across multiple sectors to analyse technical alignment with the technical screening criteria. Through the test cases, we also considered how the taxonomy would be integrated within issuance and transactions, projecting how, in practice, the CEFC would evaluate alignment with the taxonomy.
During the program, we saw how useful the taxonomy could be in providing a ready-made set of criteria for defining green and transition-related activities that were credible and practical. We see the taxonomy as a valuable resource for the market, providing legible performance benchmarks that can support investment.
The pilot demonstrated to us how the taxonomy is attuned to the dynamics of the Australian market, with respect to natural capital, infrastructure and the categorisation of transition-related activities within hard-to-abate sectors.
We believe this framing and categorisation of net zero activities within an Australian context can support increased flows of finance into areas that are critical to meeting the Australian Government’s emission reduction targets.
The Australian taxonomy’s value for investors
The taxonomy is a leading resource within the market, acting as a connector between parties, and within organisations, for transition planning, performance management and net zero aligned investment activities.
The taxonomy can be used by entities considering change by helping to define actions, supporting allocation and disclosure of capital towards net zero outcomes with confidence. It can also be leveraged by lenders and asset managers over time to confirm how aligned their portfolios are with a net zero future. Asset managers and lenders can utilise the taxonomy to develop stable lending practices that support target setting and engagement with portfolio companies.
Importantly, the taxonomy within an Australian context defines relative performance expectations within sectors, promotes global understanding and interoperability, and establishes a firmer basis for investment from global financiers and institutional investors.
How the Australian taxonomy can support capital allocation for Australia’s transition to net zero
The Australian sustainable finance taxonomy is a pivotal tool that underpins the sustainable finance roadmap and the transition to a net zero economy. The taxonomy facilitates investors and businesses to work in concert, and to channel capital into credible net zero-aligned and transition activities.
It an important step in building further confidence in Australia's transition to net zero in international markets, helping to mobilise investment into Australia's decarbonised future.