Australia’s largest banks and institutional investors have backed a significant expansion of the nation’s sustainable finance taxonomy, arguing broader criteria will help safeguard the economy from escalating climate risks and attract international investment.
In a reported global first, Australia has not only set definitions for credible transition capital flows but has applied them in practice, according to the Australian Sustainable Finance Institute (ASFI).
Institutions including ANZ, Commonwealth Bank, Clean Energy Finance Corporation, HESTA, Metrics Credit Partners, Moody’s Ratings, NAB, Rabobank, Rest and Westpac have tested the sustainable finance taxonomy in live transactions.
The ASFI has released its first set of market insights, confirming the taxonomy is guiding real investment decisions and providing confidence to global investors.
ASFI surveyed members representing more than $16 trillion in assets under management, showing strong backing for expansion into adaptation and resilience.
“Australia’s sustainable finance market is growing fast, but it’s still only a fraction of where it needs to be,” said ASFI chief executive officer Kristy Graham. “Expanding the taxonomy is about unlocking the mainstream and helping direct global capital, not just green bonds, toward the transition.”
Australia’s green bond market continues to grow but currently accounts for only 5 per cent of total bond issuance, highlighting the need for alignment across mainstream lending and investment.
ASFI’s report outlines three recommendations to the government: expanding the taxonomy to cover adaptation and resilience as a priority, increasing engagement in global standard-setting to support key sectors such as mining and agriculture, and establishing long-term governance to support ongoing updates and international coordination.
These recommendations align with the federal government’s National Adaptation Plan, released in 2025, which signals support for potential expansion of the taxonomy.
The Insurance Council of Australia also supports broadening the framework, noting that clear standards can help channel capital into disaster-resilient infrastructure and property.
“The Insurance Council and its members, along with the Resilient Building Council and Investor Group on Climate Change (IGCC) has previously recommended property sector … adaptation as a key priority for taxonomy coverage … due to the readiness of the sector to match capital with existing solutions and the interconnection between emissions reduction and disaster resilience for buildings and construction.”
Strong international interest has also emerged. China has urged Australia to join multilateral efforts to harmonise standards, including the Multi-Jurisdictional Common Ground Taxonomy.
Speaking at ASFI’s Sustainable Finance Summit in July, Wang Xin from the People’s Bank of China, said, “Collaboration on taxonomies and other areas are really important.
“Between Australia and China and other countries we need to have more understanding of green trade, green services and together develop green trade standards.”
“The taxonomy is already helping Australia define what good looks like. Now it’s about ensuring access to deeper, more competitive funding for the transition,” Graham said. “These findings show we have the opportunity, and the market demand, to build on that success and ensure capital is directed toward genuine, high-impact transition activity.”
ASFI continues to work with partners in China, the UK, Singapore and other jurisdictions to support interoperability and ensure Australian frameworks are recognised by global investors seeking transparent, comparable transition standards.
