Background and purpose

The Department of Climate Change, Energy, the Environment and Water (DCCEEW) commissioned the Australian Sustainable Finance Institute (ASFI) to explore how the Australian Sustainable Finance Taxonomy could be expanded to the agriculture and land sectors. The Agriculture and Land Taxonomy Expansion Pilot focuses on three environmental objectives: biodiversity and ecosystem protection, sustainable use and protection of water resources, and pollution prevention and control.

The pilot aligns with Australia’s Strategy for Nature 2024–2030 and the Kunming-Montreal Global Biodiversity Framework, which aim to halt and reverse biodiversity loss by 2030. It recognises the critical role of agriculture, forestry and other land management in both environmental outcomes and economic resilience.

Policy context

The Australian Government has adopted a “climate first, not only” approach to sustainable finance. The Sustainable Finance Roadmap (2024) outlines plans to expand the taxonomy to nature-related objectives. Other initiatives include the Nature Positive Plan and the Nature Repair Market, which incentivise biodiversity enhancement. These developments respond to growing demand from investors and markets for clear, consistent frameworks to address nature-related risks and opportunities.

Sector context

Australia’s agriculture and land sectors account for 55% of land use and 74% of water consumption nationally. Globally, agriculture is responsible for 73% of deforestation, 70% of water consumption and 34% of greenhouse gas emissions. Increasing demand for food and fibre, projected to rise 49% by 2050, highlights the need for sustainable practices. Forestry demand is also forecast to rise 37% by 2050.

At the same time, biodiversity provides essential services such as pollination, pest control and soil regeneration. Between one third and one fifth of Australian farmers have already adopted sustainable practices. However, greater consistency, comparability and credibility are required to scale these efforts.

Pilot methodological design

The pilot identified activities and practices across agriculture, forestry and natural ecosystems that contribute positively to the three environmental objectives. Evidence was assessed using the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services confidence model. Activities were included if they demonstrated strong scientific evidence of benefits, were relevant to the Australian context, and could be supported through monitoring and management plans.

The scope of eligible activities generally covered practices up to the farm gate, with some upstream and supporting activities such as research, monitoring and advisory services included. Whole activities were not labelled as “green” due to challenges in baselining and measurement; instead, the pilot focused on measures and practices that can be clearly demonstrated.

Draft pilot technical screening criteria

Draft criteria were developed for agriculture (including crops and livestock), forestry (afforestation, reforestation, existing forest management and conservation forestry), and natural ecosystems (such as restoration and Indigenous land management). These include practices such as soil health improvement, agroforestry, sustainable water management, pollution control, integrated pest management, invasive species management, and Indigenous cultural burning.

The criteria are mapped to Kunming-Montreal Biodiversity Framework targets, including restoring 30% of degraded ecosystems, conserving 30% of land and water by 2030, and reducing pollution harmful to biodiversity.

Do no significant harm

The Australian taxonomy’s Do No Significant Harm (DNSH) framework was applied to ensure activities aligned with the pilot objectives do not cause adverse impacts on other environmental objectives. For example, activities must not involve conversion of natural forests or draining of wetlands. Greenhouse gas emissions from land conversion, livestock and manure management are addressed through existing criteria.

Minimum social safeguards

Entities seeking taxonomy alignment must comply with the Australian taxonomy’s Minimum Social Safeguards. These cover corporate governance, human rights, labour rights, and First Nations rights and cultural heritage. The safeguards ensure that activities delivering environmental benefits are also socially responsible.

Appendices

The report notes that the Australian taxonomy was developed jointly by ASFI and Treasury between 2023 and 2025, with governance oversight from the Council of Financial Regulators. Its design principles are credibility, usability, interoperability and prioritisation for impact. The taxonomy currently covers climate change mitigation but is structured to expand to other objectives.

Australian and international initiatives were reviewed to inform the pilot, including the Nature Repair Market, Reef Credit Scheme, Land Restoration Fund, Science-Based Targets for Nature, the EU Taxonomy, and IUCN’s Nature-based Solutions. These references highlight the importance of aligning with global frameworks while tailoring criteria to the Australian context.