Australia Released a Sustainable Finance Taxonomy to Support Net-zero Transition

The urgency to limit the pace of climate change calls for involvement from every stakeholder, including business. In Australia, the government released the Australian Sustainable Finance Taxonomy with an aim to foster better alignment between investment and the nation’s net-zero targets.

Climate-aligned Economic Activities

Sustainable finance integrates environmental, social, and governance (ESG) principles and information into the decision-making processes in businesses or financial institutions. The practice directs support and capital into low-carbon projects and activities, underscoring its key role in decarbonization efforts. Additionally, information on sustainable finance disclosed in companies’ sustainability reporting provides transparency among investors and consumers on the risks and opportunities related to sustainability in their operations.

Australia has set targets to reduce carbon emission by 43% below 2005 levels by 2030 and to reach net-zero emission by 2050. Aligning economic activities in carbon-intensive sectors to support the achievement of this target is crucial. In this light, the Government of Australia has released the Australian Sustainable Finance Taxonomy to support its transition to net-zero emission.

Australia’s Sustainable Finance Taxonomy

A sustainable finance taxonomy provides a set of tools to classify and define whether an economic activity is climate-aligned. Overall, the taxonomy can ensure clarity for the market, streamline the tracking of sustainable finance progress, and unlock new investment opportunities for projects and tools related to sustainability.

The development of the Australian Sustainable Finance Taxonomy drew the expertise of sustainability and finance leaders and technical advisors, as well as gathered feedback from two rounds of public consultation. “The 20-month development process has been rigorous and collaborative, led by an independent expert decision-making body with strategic oversight from the Australian Treasury and financial regulators. It reflects deep technical input and extensive engagement across finance, industry and civil society,” said Kristy Graham, the CEO of the Australian Sustainable Finance Institute.

Australia’s finance taxonomy covers important key sectors in the country, such as mining, critical minerals, and agriculture, focusing on net-zero transition while still ensuring compatibility with internationally-recognized taxonomies. The classification allows stakeholders to identify which activities are required and can directly contribute to meeting the Paris Agreement goals, and actively align investment decisions and capital flow into these projects. Additionally, the taxonomy also includes expectations for engagement with First Nations peoples and the management of cultural heritage, though course of actions remains vague.

Fostering Participation

The Australian Sustainable Finance Taxonomy can be used voluntarily by businesses and financial institutions as an entry-level metric or activity-screening tool. Since its publication in June 2025, the taxonomy will implement a pilot period for several months involving major financial institutions. This period aims to explore the taxonomy’s implementation, improve market guidance, and gather feedback for refinement.

Ultimately, this highlights the importance of actors in the business and financial sector to participate in sustainable development efforts, particularly in light of the climate crisis. Creating a nation-wide framework acts as an essential enabling instrument to ignite commitment and actions to support people and the planet.

Editor: Nazalea Kusuma

Kresentia Madina

Reporter at Green Network Asia | Website | + posts

Madina is the Assistant Manager for Digital Publications at Green Network Asia. She graduated from Universitas Indonesia with a bachelor's degree in English Literature. She has three years of professional experience working on GNA international digital publications, programs, and partnerships particularly on social and cultural issues.