What is sustainable finance

Sustainable finance incorporates environmental, social, and governance (ESG) considerations into investment decisions alongside financial outcomes. It supports infrastructure, technology, housing, and net zero transitions. Long-term, systemic change is necessary, requiring supportive regulatory settings to unlock private capital for national benefit.

Responsible investing in Australia today

Responsible investment in Australia reached A$1.6 trillion, with 53% of institutional investors adopting it in 2023, up from 48% in 2022. Public demand remains strong: 88% of Australians expect their investments to be ethical, and 65% would invest more if doing so had a positive impact. Performance concerns have declined, with fewer investors deterred by fears of underperformance (45%, down from 52%).

Platform summary

The report outlines nine interrelated policy priorities and two overarching principles to advance responsible investment. These include improving transparency, embedding net zero commitments, addressing nature and human rights risks, and supporting First Nations participation.

Capitalise on Australia’s opportunity to become a sustainability leader

Australia’s uptake of sustainable finance is increasing, improving economic resilience. As climate risk rises, coordinated policy is required. Australia can play a global leadership role through international engagement, such as the IPSF and G20 Sustainable Finance Working Group. Areas of competitive advantage include energy transition, biodiversity, and Indigenous knowledge integration.

Build Australians’ trust in responsible investment

Mandatory full portfolio holdings disclosure and product labelling based on RIAA’s Certification Program are recommended to reduce greenwashing. A national stewardship code, adviser education, and mandatory sustainability interest assessments are also proposed. Greenwashing concerns are high, with 78% of Australians worried about misleading claims.

Make sustainable investment easier with fit-for-purpose regulatory frameworks and the right guidance

Amendments to the superannuation performance test are proposed to remove disincentives for long-term, emerging sector investments. Climate-related disclosures, guidance on transition plans, and early regulatory support are key. Nature risk reporting, updated carbon offset policies, and clear consumer communication guidelines are also suggested.

Reduce nature-related financial risks and support a nature positive transition

Australia’s ecosystems hold carbon valued at $43.2 billion. To manage nature risks, domestic legislation should embed the Global Biodiversity Framework, mandate nature disclosures, and invest in natural capital. 34% of investors screen for biodiversity; 62% engage on nature issues.

Prioritise progress of the sustainable finance roadmap

The 2024 Roadmap outlines steps to align capital with sustainability goals. Recommendations include legislated labelling, taxonomy expansion, case study guidance, and regulatory barrier removal. Proper resourcing of agencies is critical for timely implementation.

Provide certainty to markets and global investors by reinforcing net zero commitments with science-based targets and investment in proven technologies

Policies should include interim science-based targets and investments in renewables and innovation. Expanded support for CEFC, ARENA, and Net Zero Economy Authority is advised. A Green Bond Framework can facilitate funding of transition-aligned projects.

Support economic self-determination for first nations peoples and embrace Indigenous knowledge to drive sustainable investment outcomes

Many transition-related projects will occur on First Nations land. Legislating the UNDRIP, adopting FPIC, and using Indigenous guides like Dhawura Ngilan can reduce approval delays and project risks while supporting wealth creation for Traditional Owners.

Equip Australia with the data to support good investment decision-making

A central, free repository for climate and sustainability data is proposed. Scenario frameworks, standardised tools, and coverage of scope 3 emissions will assist investment analysis. Broader integration of ESG in corporate transition plans is recommended.

Improve human rights protections to support investors in managing modern slavery and supply chain risks

Implementing all 2023 Modern Slavery Act review recommendations is advised. Investors view modern slavery as a material risk to returns. Due diligence systems, reporting thresholds, and timeframes should be revised to better identify and mitigate risks.

Policy principles

The report calls for cross-government coordination and alignment of all policy levers with net zero aims. Policy impacts on other sustainability areas—such as labour rights and biodiversity—must be acknowledged and managed.