Australia’s leading financial institutions have voiced strong support for expanding the national Sustainable Finance Taxonomy to better direct capital towards sustainability goals and bolster resilience against climate risks.
According to the inaugural report from the Australian Sustainable Finance Institute (ASFI), titled Unlocking Private Capital for the Transition: Market insights from the practical application of the Australian Sustainable Finance Taxonomy, around 80% of surveyed institutions backed extending the taxonomy to include climate adaptation and resilience.
A similar proportion supported the creation of a shared public–private governance model, which they said would be crucial to ensuring the taxonomy’s credibility and usability among investors.
Institutions participating in ASFI’s pilot testing included ANZ, Commonwealth Bank, Clean Energy Finance Corporation, HESTA, Metrics Credit Partners, Moody’s Ratings, NAB, Rabobank, Rest and Westpac.
The report also underscored that Australia’s green bond market remains underdeveloped, accounting for just five per cent of total bond issuance, according to Westpac IQ’s 2025 analysis. This limited scale, the report noted, constrains efforts to embed taxonomy alignment across mainstream lending and investment.
“Australia’s sustainable finance market is growing fast, but it’s still only a fraction of where it needs to be,” said Kristy Graham, Chief Executive Officer of ASFI.
“Expanding the taxonomy is about unlocking the mainstream and helping direct global capital — not just green bonds — toward the transition. These findings show the opportunity and market demand to ensure capital flows into genuine, high-impact transition activity.”
The ASFI report sets out three key recommendations for government action:
- Expand the taxonomy to include adaptation and resilience as an immediate priority;
- Enhance international engagement to shape emerging global standards, particularly for mining and agriculture; and
- Establish enduring governance arrangements to enable ongoing public–private collaboration in taxonomy implementation and expansion.
ASFI said the taxonomy is already helping Australia define “what good looks like” in sustainable finance but warned that scaling it up will be essential to attracting deeper and more competitive funding for the nation’s net-zero transition.
