July Kick-off for Australia’s Sustainable Finance Taxonomy

RFPs issued by Australian Sustainable Finance Institute for first phase of taxonomy project.

The Australian Sustainable Finance Institute (ASFI) is soliciting help from consultants to commence work on the first phase of its sustainable finance taxonomy project, part of Australia’s efforts to achieve net zero by 2050.

AFSI was set up to realign the Australian financial services sector to accelerate money flows to activities that will create a sustainable, resilient and inclusive Australia. The organisation has been working to coordinate, facilitate and drive implementation of the Australian Sustainable Finance Roadmap, published in November 2020.

Among its recommendations, the Roadmap included the development of a sustainable finance taxonomy, which AFSI says will help to make it easier to identify opportunities, create sustainable assets and activities, and guide capital to support the achievement of Australia’s climate, environmental and social objectives. A taxonomy will also “provide investors with confidence and assurance of sustainability claims, enabling comparability between investment products and portfolios and reducing transaction costs,” AFSI says.

AFSI executive officer Kristy Graham says a local taxonomy is critical for the continued financing of energy projects, because Europe’s taxonomy – on which most of Australia’s sustainable financing is currently based – is so strict around transition finance, with no room for new oil and gas. “The sense from regulators, the government and the finance sector is that we wouldn’t be able to ensure that sufficient capital could keep flowing to that sector without this Australian taxonomy,” she said.

AFSI’s taxonomy project will build on work done on sustainable finance taxonomies internationally, including by the EU, the Common Ground Taxonomy, Japan and Singapore, also working with experts and stakeholders across the Australian financial system to determine what a sustainable finance taxonomy should look like in the country to ensure “international credibility and inter-operability while reflecting the Australian economy and context”. AFSI plans to also coordinate its work taxonomy projects in other jurisdictions, including New Zealand.

In an RFP issued last week, AFSI said developing an Australian Sustainable Finance Taxonomy is a key priority for 2022. The first phase of the project will analyse international taxonomy frameworks, establish guiding principles for the taxonomy, make recommendations on the most appropriate framework for an Australian taxonomy framework, and finalise the process of Australian taxonomy development.

The RFP seeks proposals from consultants with the “appropriate skills, knowledge, expertise and leadership credentials” to work with ASFI, its Technical Advisory Group, Project Steering Committee and other stakeholders on the first phase of the taxonomy project. Firms are asked to submit their RFPs by 14 June, including information about the proposed structure of the project team, capability of the organisation in sustainable finance and taxonomies, details of experience.

The appointed project team will be responsible for undertaking research, analysis, preparing draft papers and presentations for input by the Technical Advisory Group and approval by the Project Steering Committee, manage and facilitate stakeholder engagement processes, and work with ASFI staff on the project management function of the project.

The project team will be selected and appointed by 23 June 2022, with a view to commencing work by 4 July 2022 and completing the first phase of the taxonomy project in November 2022.

The project is being funded by IFM Investors, Commonwealth Bank, National Australia Bank, Cbus, HESTA, IAG, and Deloitte.

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