Existing corporate reporting data collected under the European Union’s sustainable finance taxonomy can serve as a functional baseline for financial market participants assessing alignment under Australia’s emerging green taxonomy, according to joint research published by the Australian Sustainable Finance Institute (ASFI) and index provider ISS STOXX.
The report evaluated interoperability across both frameworks at activity, corporate, and portfolio levels to address growing industry concerns that the proliferation of national sustainable finance taxonomies risks fragmenting international capital markets and inflating compliance costs.
The study mapped 52 of the 61 green and transition economic activities covered in the Australian Sustainable Finance Taxonomy to at least one equivalent activity in the EU framework, establishing an 85 per cent activity-level overlap. Furthermore, over half of the assessed Australian activities possessed a direct or strong proxy in the EU taxonomy, enabling investors to reuse existing environmental data rather than gathering separate metric-level information for cross-border holdings.
Comparative testing applied to the STOXX 1800 global equity index yielded near-identical portfolio-level outcomes, with baseline alignment figures differing by just 0.04 percentage points between the two regulatory regimes.
However, researchers noted specific operational limitations in the cross-taxonomy mapping approach. The EU Taxonomy currently lacks coverage for several core industrial sectors included in the Australian framework, particularly critical minerals, mining, and metals processing. Consequently, relying exclusively on EU data inputs could understate total taxonomy eligibility and alignment for resource-heavy Australian equity portfolios.
The report also highlighted that variations in how environmental and social safeguard criteria are interpreted and applied across jurisdictions produced noticeable differences in final alignment ratings, underscoring the need for ongoing international harmonization efforts.
