Submission: Taxonomy alignment key to credible Net Zero Fund design
The Australian Sustainable Finance Institute (ASFI) has lodged its submission to the Department of Industry, Science and Resources on the design of the Net Zero Fund, a sub-fund of the National Reconstruction Fund.
ASFI supports the establishment of a Net Zero Fund that is explicitly designed to mobilise private capital for the decarbonisation of Australia’s manufacturing and industrial sectors.
The submission recommends that the Fund’s investment criteria align with Australia’s Sustainable Finance Taxonomy to ensure credibility and consistency in identifying projects that genuinely support the transition to net zero by 2050.
A well-designed Net Zero Fund has the potential to accelerate industrial transition, reduce investment risk and unlock large-scale private finance to support emerging low-emissions industries and technologies.
By embedding credible taxonomy-based definitions and adopting catalytic financing approaches, the Fund can help ensure Australia remains a competitive, investible economy and captures emerging green export opportunities.
Key Recommendations
In its submission, ASFI outlines four key principles to guide the design and operation of the Net Zero Fund.
Align with the Australian Sustainable Finance Taxonomy: the taxonomy provides a credible, science-based and industry-informed list of eligible activities and project types for investment. Alignment with these criteria will ensure the Net Zero Fund directs finance towards activities that genuinely decarbonise industry and are consistent with net zero objectives.
Design the Net Zero Fund to be catalytic and de-risk private capital: the Net Zero Fund should invest in ways that improve the risk-return profile for private investors, so that its capital is truly catalytic and crowds in, rather than crowds out, private finance.
Earmark higher-risk, lower-return capital: ASFI recommends dedicating a portion of the Net Zero Fund to higher-risk investments to fill the early-stage capital gap for emerging technologies and clean-industry projects. This approach mirrors successful models like the CEFC’s Innovation Fund and can deliver strong long-term economic and environmental returns.
Leverage existing institutional expertise: the Net Zero Fund should work closely with the Clean Energy Finance Corporation (CEFC) and ARENA to use their technical and commercial capabilities, align investment processes and fill the funding gap between early-stage grants and commercial finance.
By embedding these principles in its design, the Net Zero Fund can act as a catalyst for credible industrial decarbonisation, mobilising billions in private capital to deliver economic resilience and sustainable growth for Australia.