Australia Sustainable Finance Strategy
The Australian Treasury has released a consultation paper on sustainable finance strategy, which aims to establish a comprehensive framework for sustainable finance, reduce investment barriers, and achieve the net zero goal.
The Treasury believes net zero transition will require significant private and public investment, and financial markets can assist this procedure. A sustainable finance strategy will ensure businesses have access to the capital they need to transform and identify and respond to the risks and opportunities posed by climate change. This document will also promote the development of sustainable financial markets.
Related Post: Australia Plans to Establish Climate Related Financial Disclosure Framework
Goals of the Sustainable Finance Strategy
The Sustainable Finance Strategy focuses on key issues such as transparency, credibility and governance of financial markets for sustainable development and complements existing climate, economic and environmental policies. The sustainable finance strategy has three goals:
- Attract private capital to participate in the net-zero transition and strengthen the application of renewable energy.
- Ensure that businesses have access to financial support to pursue sustainable business opportunities.
- Ensure that financial systems understand and manage sustainability-related opportunities and risks.
In order to achieve the above three goals, the sustainable finance strategy has formulated three pillars:
- Increase transparency of climate and sustainability information.
- Strengthen the sustainability of the financial system.
- Call for leadership and participation from government departments.
Increase Information Transparency
Improve the transparency of climate and sustainability information is fundamental to a sustainable finance strategy, and a clearly identified, communicated, and easily comparable market can improve the efficiency of funding. The specific measures of the sustainable finance strategy are as follows:
- Establish a framework for sustainability-related financial disclosures. The government is implementing mandatory climate-related financial disclosure requirements for large companies and financial institutions, which will begin in July 2024. At the same time, it will continue to pay attention to other international sustainability-related financial frameworks and establish globally consistent financial disclosure requirements.
- Develop a sustainable finance taxonomy. The sustainable finance taxonomy will focus on climate mitigation objectives and address greenwashing, playing a role in bridging finance. The taxonomy will be a source of guidance for businesses, investors and regulators, increasing transparency and supporting the development of sustainable financial products.
- Support net zero transition planning. At present, 75% of companies in ASX200 index have issued net zero targets. The development of high-quality net zero plans that are consistent with international standards can promote transition financing activities.
- Develop a labeling system for sustainable investment products. Currently, more than $1.3 trillion in assets in Australia use sustainable investment strategies, and the government plans to develop a labeling system for investment products in consultation with regulators and industry stakeholders based on international standards.
Strengthen Financial System
Sustainability has become a key factor as financial market participants seek to manage risks and prepare for the long term, and regulators are prioritizing climate and sustainability issues and determining how these fit in with existing regulatory directives. The specific measures of the sustainable finance strategy are as follows:
- Strengthen market supervision. The government will address misconduct related to sustainable financial markets, with a focus on greenwashing, and consider bringing ESG rating agencies into the scope of financial regulation.
- Identify potential systemic financial risks. The government will continue to expand its work on climate-related financial risks, improve the climate risk management capabilities of market participants, and incorporate climate scenarios into stress testing.
- Solve sustainable data challenges. The government will work with investors to ensure that sustainable tools and frameworks are adapted to market needs and understand data challenges, including improving data analysis tools, strengthening the measurement of natural capital and providing high-quality climate information and services.
- Ensure regulatory frameworks are realistic. The government will assess how to integrate sustainability into corporate governance and financial institutions’ decision-making processes, and assess the effectiveness of regulatory frameworks and industry codes in managing investors.
Call for Government Actions
Government commitments, policies and strategies are important for sustainable development and are signals for financial markets to allocate capital in the long term. The specific measures of the sustainable finance strategy are as follows:
- Issue government green bonds. The government will issue green bonds for the first time in the middle of next year to increase the scale of green investment and support the maturity and scale of the green capital market.
- Promote the development of sustainable financial markets. The government will increase investment in the energy transition, support the development of sustainable benchmark facilities, and enhance climate risk assessment capabilities.
- Strengthen international coordination. The government will continue to develop a sustainable finance framework that is consistent with global standards and strengthen knowledge sharing and communication between different jurisdictions.
- Improve sustainable leadership capabilities. As a resource-intensive developed economy, the government will continue to support innovative financing models, support sustainable investment and improve Australia’s sustainable finance status.
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