The Australian Sustainable Finance Initiative (ASFI) has released its final roadmap, outlining 37 recommendations, including developing an Australian taxonomy for sustainable finance. The benefits of having a common taxonomy include standardizing consistent language that could facilitate further development across sectors.
The challenge in developing a taxonomy is to cover the entire financial services sector, covering a broad swathe of products and services covering loan, finance, insurance, and investment activities. Also, definitions and terms will have to be balanced between principles-based and overly proscriptive. A significant hurdle is the presence of more than 20 Environmental, social, and governance (ESG) and climate change signatory groups.
The development of an industry-led taxonomy would provide common definitions of sustainable finance across investment, banking, and insurance. While industry participants welcome the idea of common definitions, establishing and then implementing the taxonomy are vital questions that need to be resolved to maximize its benefits.
Click here to read the original article published by FS Sustainability.
Please give your feedback on this article or share a similar story for publishing by clicking here.
