Government releases Sustainable Finance Strategy consultation 

Late last week (2 November), the federal government released a consultation paper on its Sustainable Finance Strategy, which it said would help Australian companies and investors transition to net zero.

The government stated that the strategy was about mobilising the “significant private capital needed to achieve net zero, modernising financial markets and maximising the economic opportunities associated with its energy, climate and sustainability goals”.

The consultation paper listed the three overarching objectives of the strategy, which are:

• Mobilising the private sector investment needed to support net zero, Australia becoming a renewable energy superpower and other sustainability goals.
• Ensuring Australian entities can access capital and pursue business opportunities that support the transition and are aligned with positive sustainability outcomes.
• Ensuring climate and sustainability-related opportunities and risks are well-understood and managed at the entity and systemic level.

The strategy was broken into three key pillars: improve transparency on climate and sustainability, financial system capabilities and government leadership and engagement.

Within each pillar, the government listed four priorities that it was looking to meet.

• Pillar 1: Establish a framework for sustainability-related financial disclosures, develop a sustainable finance taxonomy, support credible net-zero transition planning and develop a labelling system for investment products marketed as sustainable.
• Pillar 2: Enhancing market supervision and enforcement, identifying and responding to potential systemic financial risks, addressing data and analytical challenges and ensuring fit-for-purpose regulatory frameworks.
• Pillar 3: Issuing Australian sovereign green bonds, catalysing sustainable finance flows and markets, promoting international alignment and positioning Australia as a global sustainability leader.

Federal Treasurer Jim Chalmers stated: “We want to ensure that markets have access to high quality, credible and comparable information when it comes to climate and sustainability so that investors and companies have the confidence, clarity and certainty they need, and they are better able to manage climate-related risks.

“It proposes a wide range of tools and policies and builds on substantial work already underway, including the introduction of standardised, internationally aligned mandatory climate disclosure requirements and our sovereign green bond program.

“The net zero transformation is a defining opportunity for Australia and the Albanese government is wasting no time taking action.”

As part of the shift to support net-zero transition planning, the strategy proposed that large companies and financial institutions must disclose climate-related opportunities and risks, bringing the nation in line with the International Sustainability Standards Board (ISSB) standards.

It said this should include information about climate-related targets, progress towards these targets and any mitigation strategies as businesses work towards the net-zero transition.

The strategy paper also proposed that the government should legislate to create a labelling regime for investment products marketed as sustainable or similar, including for managed funds within superannuation.

It stated that the Treasury would begin work in 2024 to create clearer labelling arrangements, as well as standardising the use of sustainability terminology across investment product marketing by creating minimum standards for a prescribed sustainability label.

Submissions for the Sustainable Finance Strategy consultation paper will close on 1 December.

[Related: ASIC to crack down on predatory lending]