Australia: ESG Investing a target for the New Government?

By Jim Bulling and Kithmin Ranamukhaarachchi

A Federal election in Australia was held at the weekend which resulted in a change of Government. One of the signature priorities of the incoming Government is to introduce policies which more comprehensively address climate change challenges.

More ambitious emissions reduction targets will require a concerted effort on multiple fronts, including a regulatory environment encouraging the allocation of private capital (both equity and debt) to assets which mitigate or reduce carbon emissions, rather than assets which make the achievement of net zero by 2050 even more difficult or more expensive.

The development of clear and unambiguous guidelines for long term sustainable investment (an ESG Investing Taxonomy) would undoubtedly provide Australian fund managers, investors and investees additional transparency in their asset allocation decisions, projections and reporting.

The responsibility of developing an Australian ESG Investing Taxonomy was initially taken up by the Council of Financial Regulators and was then delegated to the Australian Sustainable Finance Institute but so far there is little detail generally available of progress to date. However there are currently a number of well developed  ESG Investing Taxonomies which Australian fund managers and investors could use as reference points including those produced by the EU, ASEAN and Singapore.

It is hoped that the new Australian Government’s commitment to climate change initiatives can fast track the development of an ESG Taxonomy in Australia and provide additional certainty for Australian investors and investees that the allocation of private capital is as efficient as possible in the transition to net zero by 2050.