Australian net-zero projects to be rated to prevent greenwashing

Environmental projects will be analysed and rated in Australia in a move experts say could prevent greenwashing and encourage international investments.

The environmental credentials of projects across six industries, from mining to manufacturing, will be assessed and rated under a system experts say could boost international investment in Australia.

The Australian Sustainable Finance Institute released its long-anticipated sustainable finance taxonomy rules on Tuesday, with its chief executive hailing the move a “transformative moment” for green investments.

The framework will be tested in an eight-month pilot by a group of Australian financial institutions, including the nation’s four major banks, the Clean Energy Finance Corporation, and superannuation firms Rest and HESTA.

The announcement follows the development of similar rules for green investments in 47 countries, including China and Singapore, and forecasts Australia could boost its revenue with green metal exports.

The sustainable finance taxonomy rules were developed by the institute across 20 months, led by a 25-member technical expert group.

Unlike rules in other nations, the Australian taxonomy will classify projects in six sectors: mining, minerals and metals, electricity generation and supply, building and construction, manufacturing, transport and agriculture.

Australian Sustainable Finance Institute chief executive Kristy Graham said assessing projects within the uniquely Australian categories would be vital to ensuring local and international investors could be confident about their claims.

“Australia needs to attract a lot of capital to support our net-zero transition,” she told AAP.

“It is a global race for capital and many countries are a bit ahead of us.

“The taxonomy is a framework that credibly, using a scientific basis, defines those assets and activities that are in line with that net-zero transition so both Australian investors and international investors can identify and channel capital towards those activities.”

The framework, which Ms Graham said would be “transformative” for the Australian green investment market, is designed to help businesses assess whether projects can be classified as green or transition activities.

The taxonomy includes rules to set social safeguards, such as engagement with First Nations people, and to exclude projects that cause significant environmental harm.

Having rules to rate and classify green projects could boost international investment in net-zero projects, Clean Energy Finance Corporation chief executive Ian Learmonth said, as the framework was compatible with international standards.

“It is an important step in building further confidence in Australia’s transition to net zero in international markets,” he said.

“The taxonomy facilitates investors and business to work in concert and to channel capital into credible, net-zero-aligned and transition activities.”

The Australian framework would also be compatible with the Climate Bonds Initiative’s certification scheme, its co-founder Sean Kidney said, to “support investor confidence”.

Forty-seven nations use sustainable finance taxonomies to assess environmental projects following the launch of the European Union’s framework in 2020.

Source: AAP