On 19 June 2024, the Albanese government launched its highly anticipated Sustainable Finance Roadmap (Roadmap). This comprehensive blueprint is designed to assist companies, investors, and the broader community in seizing the immense opportunities that come with Australia’s transition to net zero emissions. The Roadmap is poised to:
- Mobilise significant private capital to position Australia as a leading player in renewable energy,
- Modernise our financial markets, and
- Maximise the economic benefits associated with net zero emissions and sustainability objectives.
The Treasurer, the Hon Jim Chalmers MP, emphasised that the Roadmap aims to create well-designed and informed financial markets. This will enable companies and investors to make confident investment decisions, better manage climate and sustainability risks, and finance the shift to net zero.
A Clear Path Forward
The Roadmap outlines a clear and coordinated approach by which the government, regulators, and industry will collaborate to implement sustainable finance initiatives and reforms. It is centred on enhancing transparency around climate, sustainability, and financial system capabilities. This effort builds on Australia’s existing corporate climate disclosure framework, which is currently supported by about 900 Australian corporations and asset managers with over $80 trillion in assets under management.
Key priorities identified in the Roadmap include:
- Addressing environmental misconduct, such as greenwashing,
- Enhancing understanding of climate risks and opportunities, and
- Improving access to climate and emissions data.
Background of the Roadmap
The Roadmap was formulated following the Sustainable Finance Strategy consultation (Consultation) held from 2 November 2023 to 1 December 2023. The primary goal of this Consultation was to support Australia’s pathway to net zero by easing the barriers to investment in sustainable activities.
The Consultation attracted a total of 140 submissions, including significant contributions from the NSW government, BHP, Rio Tinto, CBA, and the Insurance Council of Australia. Feedback from these submissions has been instrumental in shaping ongoing policy development and regulatory engagement on sustainable finance in Australia.
Details of the Roadmap
1. Implement Mandatory Corporate Climate Disclosures
The government is moving forward with mandatory climate-related financial disclosure requirements for large corporations and financial institutions, with legislation currently under parliamentary review. These disclosures are intended to provide investors with greater transparency and comparable information on a company’s exposure to climate-related risks and opportunities, as well as its climate strategies and plans. Pending legislative approval, these reporting requirements will commence on 1 January 2025 for Australia’s largest companies and financial institutions, alongside entities subject to the National Greenhouse and Energy Reporting (NGER) scheme.
ASIC will offer guidance to assist corporations in complying with their new obligations and is also evaluating the impact of the new regime on existing financial reporting relief measures.
2. Complete Australia’s Sustainable Finance Taxonomy
The purpose of this Taxonomy is to direct private capital towards sustainable activities, lay the groundwork for addressing issues like greenwashing, and facilitate Australia’s transition to net zero. The government has collaborated with the Australian Sustainable Finance Institute (ASFI) in developing this Taxonomy, focusing on mitigating climate risk. Key sectors under consideration include energy, electricity, industry/resources, environment, transport, agriculture, and land. The initial Taxonomy will incorporate criteria such as “do no significant harm” and “minimum social safeguards” and will be available on a voluntary basis for both private and public sectors. This Taxonomy is set to become a crucial tool for corporations, regulators, and investors in advancing sustainable financial products.
3. Develop Product Labelling Requirements for Sustainable Investments
The government is committed to establishing consistent labelling and disclosure requirements for investment products labelled as “sustainable” or similar. This includes managed funds within the superannuation system. The goal is to help investors understand how sustainability considerations are integrated into investment products or strategies, ensuring trust in the sustainable finance products in which they invest. This initiative is in response to the growing demand for investment products with specific sustainability objectives, supporting both financial product providers and investors.
Treasury is currently reviewing key labelling initiatives from other jurisdictions, particularly the US, UK, and EU.
4. Develop Best Practice Guidelines
The government will also develop and publish guidance on best practice for disclosing net zero transition plans before the end of 2025. This guidance will take into account:
- Corporate and investor priorities in transition plan preparation,
- Emerging domestic and international frameworks and standards, including outcomes from the G20 Sustainable Finance Working Group,
- The government's planned Net Zero Plan and sector-specific decarbonisation pathways, and how these pathways may support corporate transition planning,
- Existing transition plan disclosure practices by Australian companies, both before and after the implementation of the government’s climate disclosure reforms.
Next Steps and Further Reading
In crafting this Roadmap, the government has engaged extensively with industry stakeholders to refine its sustainable finance strategy. This collaborative effort will continue as the Roadmap is put into action, ensuring that Australia maximises the investment and economic opportunities presented by the net zero transformation.
For those keen to delve deeper into the details and future implications of the Sustainable Finance Roadmap, further reading and resources will be made available through Wolters Kluwer’s Company Law division.
Source:Written by June Ahern, Senior Content Editor in Company Law, Wolters Kluwer.
