Plans to launch the nation’s first sovereign green bond, as well details on the sustainable investment taxonomy, were discussed at the Treasurers investor roundtable held last week.

Progress on green bonds has been welcomed as it aims to boost institutional investment in the transition to net-zero emissions and is expected to attract both domestic and international investors. Jim Chalmers, has stated that the bond will allow large investors, such as superannuation funds and banks, to finance public projects geared towards Australia’s net-zero transformation.

The Australian Office of Financial Management (AOFM) will manage the program, and a green bonds framework will be developed. It is planned to launch in the middle of 2024. This marks a significant shift for the country, as it joins other OECD countries that have already embraced sovereign green bonds. By offering investors a new way to tap into public projects aimed at the energy transition, Australia aims to bolster the scale and credibility of its green finance market.

Following other developed economics, the federal government also plans to develop a sustainable finance taxonomy to provide common standards and definitions for sustainable activities and assets. This taxonomy is crucial for boosting investor confidence and channeling more capital towards climate-friendly projects.

It will be developed with the Australian Sustainable Finance Institute (ASFI). CEO of ASFI, Kristy Graham, highlighted the absence of a sustainable finance taxonomy as a significant barrier to investment in climate solutions, including clean energy, in Australia. The government’s decision to back a taxonomy is considered a major step forward, as it will help direct additional capital towards the climate transition.

Superannuation fund executives have welcomed the development of a taxonomy, stating that it will improve the credibility and transparency of sustainable finance options, giving investors more confidence. Establishing a sustainable finance taxonomy can support long-term investors like super funds in better pricing risk and identifying opportunities to invest more in Australia’s transition.

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