Federal government unveils new sustainable finance strategy

The Australian federal government has unveiled its new sustainable finance strategy that recognises the key role of investors in building a sustainable nation.

This new strategy encompasses a range of measures to improve transparency, deepen Australia’s green finance markets, and seize opportunities presented by surging global momentum in sustainable finance.

Treasurer Jim Chalmers said the strategy will be developed in close co-ordination with the Council of Financial Regulators (the heads of the Australian Prudential Regulation Authority, the Australian Securities and Investment Commission, the Reserve Bank of Australia and the Treasury Secretary).

These financial regulators, other Commonwealth departments and industry, and will be considered by Government in early 2023 before a period of public consultation on key measures.

The strategy will include the development of new standards or taxonomies for sustainable investment, further initiatives to reduce greenwashing and strengthen ESG labelling, and more ambitious participation in global forums to support climate and sustainable finance frameworks and investment – especially here in our part of the world.

Chalmers said, “The government has already made progress by legislating Australia’s 2050 net zero commitment, updating our nationally determined contribution to a 43 percent reduction in emissions by 2030, and implementing a range of measures to deliver on these goals.

“We’ve also made climate and sustainable finance a key priority for Commonwealth-State coordination through the regular Treasurers’ meetings. With these commitments in place, financial markets are much better placed to make the long-term investments needed to meet these targets.”

Chalmers said the government’s intention is to provide a strong foundation for clear, comparable and credible climate-related financial reporting by Australian entities that improves transparency for customers and investors and aligns with global practice.

“The Albanese Government is not wasting a day in responding to the challenge of climate change and maximising the economic opportunities from investing in cleaner, cheaper and more reliable energy,” he ended.

In response to this news, the Responsible Investment Association Australasia (RIAA) said while this is a “great step forward, it’s just the start”.

A spokesperson for the RIAA said, “By reaffirming its commitment to mandatory corporate climate risk reporting, the Government is supporting investors to make better decisions, to be able to compare apples with apples.

“These climate disclosure standards must be clear and robust, to ensure investors can distinguish corporates with real commitment and outcomes from the illusion of tangible change. There should be scope to grow this reporting regime to broader sustainability performance – important areas such as upholding First Nations Peoples’ rights and protecting and restoring biodiversity.”

These matters are also front of mind for investors and are also shaping decisions on where they deploy their capital, according to the RIAA.

“The government’s support for industry work to build a sustainable finance taxonomy is an important signal and a critical underlying piece. Each of these commitments announced today have been core asks seeded by RIAA over recent years, and finally sets in train a more coherent policy suite in Australia to drive more sustainable finance in a manner consistent to many of our major trading partners,” the RIAA said.

“This emerging suite of policies starts to set in place the right enabling environment to unlock capital towards the big economic and sustainability challenges we have to urgently address.”