Treasury has sought feedback on its Sustainable Finance Strategy consultation paper [PDF], released in November 2023.
Climateworks supports the development of the Strategy, with the aim of providing an ambitious and comprehensive framework for reducing barriers to investment in Australia’s pathway to net zero.
The development of the Strategy provides a crucial opportunity to help mobilise private investment for corporations to finance their transition to net zero, through improving transparency, building the capabilities of financial systems, and developing climate-related disclosure regimes and a sustainable finance taxonomy.
This is especially urgent, given the window to keep global warming within 1.5°C degrees is still open but narrowing.
Climateworks’ scenario analysis shows that Australia can still achieve least-cost trajectories compatible with Paris Agreement climate goals, however those trajectories involve very strong emissions reductions this decade:
- 68% reduction below 2005 levels for the 1.5°C degree scenario; and
- 48% reduction below 2005 levels by 2030 for the well-below-2 degree scenarios.
Climateworks recommends that Treasury should:
- Design the implementation plan so that it is explicitly linked to the Strategy’s objective of mobilising private and public investment to transform Australia’s economy in line with reaching net zero emissions, Australia becoming a renewable energy superpower and other sustainability goals. Treasury should also set the commitment for the net zero emissions goal to be clearly linked to the action required by Australia to be in line with the Paris Agreement’s goal of limiting global warming to 1.5°C.
- Establish in the implementation plan how the government will support the development of a coherent sustainable finance system architecture – including but not limited to mandatory disclosure on addressing climate-risk, credible transition plans and the sustainable finance taxonomy. This will require the development of clearly defined and effective data tools regulatory frameworks, which are interoperable and standardised across platforms, solutions and interfaces.
- Set out in the implementation plan a timetable for mandatory disclosure and reporting requirements in line with ambitious, best-practice approaches internationally. This should include how criteria beyond climate and financial disclosures will be integrated
- Commit to review corporate and financial sector regulation to ensure these are coherent with the Sustainable Finance Strategy – in particular that tests for these sectors are consistent with Paris-aligned net zero commitments and credible transition plans such as the benchmarks used in Your Super Your Future performance tests.
- Commit to issue guidance on transition plan requirements in line with international best practice and set out the timetable for when Treasury will issue this guidance. This should include guidance on how to assess the alignment of transition plans with a credible, 1.5C-aligned pathway.
- Ensure there are agreed Paris-Agreement aligned sectoral pathways established for Australia. Agreement on these pathways should include support by a range of stakeholders across industry, banks, investors bodies, researchers and civil society.
- Develop an Australian sustainable finance taxonomy based on agreed 1.5C-aligned sectoral pathways. Ensure the taxonomy is consistent with corporate disclosure and reporting requirements to ensure alignment with the agreed sectoral pathways.
- For those seeking government funding, extend the application of disclosure requirements to include credible transition plans and evidence-based decarbonisation targets, for priority industrial areas. And explore how Australia’s sustainable finance taxonomy could prioritise transition in these key industrial areas to support Australia to become a renewable energy superpower that unlocks economic opportunity in the global transition to a net zero economy.
- Set out in the implementation plan how government will support the development of scientifically-credible public datasets to measure natural capital in a structured, accessible and consistent manner that will allow businesses, investors and regulators to address emerging requirements in relation to TNFD.