How organisations are applying the Australian Sustainable Finance Taxonomy

The Australian Sustainable Finance Taxonomy (‘the Taxonomy’) was launched in June 2025 by the Australian Sustainable Finance Institute (ASFI) following a 20-month development process involving government and industry. It provides a common framework for identifying green and transition-aligned economic activities, helping improve consistency across sustainable finance decisions.

More than a year on, the focus is shifting from framework development to market adoption. The Taxonomy is already being applied in areas including labelled debt, sustainable finance frameworks, capital allocation, investment decision-making and due diligence. As investors, lenders and investment committees seek greater confidence in sustainability claims, it is becoming an increasingly important reference point for assessing and communicating alignment.

The framework is also evolving. ASFI has commenced work to explore nature and adaptation and resilience criteria, which could eventually provide greater clarity around investments that help organisations prepare for physical climate risks.

This article explores how the Taxonomy is being used today, what its potential expansion could mean, and how to apply the Taxonomy in your organisation.

What is the Australian Sustainable Finance Taxonomy?

The Australian Sustainable Finance Taxonomy is a voluntary, science-based classification system that provides a common language for green and transition finance. It sets out criteria for assessing whether economic activities are aligned with climate objectives, helping businesses, investors and financial institutions make more consistent decisions about sustainable finance and investment.

The Taxonomy aims to improve comparability between investments and financial products and provide greater confidence in green and transition claims. Unlike AASB S2 and the Australian Sustainability Reporting Standards (ASRS), it is voluntary and does not introduce new reporting obligations for organisations.

The Taxonomy currently focuses on climate change mitigation across six sectors that are particularly important to the Australian economy:

• Electricity generation and supply
• Minerals, mining and metals
• Construction and buildings
• Manufacturing and industry
• Transport
• Agriculture and land

To be considered Taxonomy-aligned, activities are assessed against three key components:

• Technical Screening Criteria (TSC): activity-specific requirements used to determine whether an activity makes a substantial contribution to climate mitigation or meets the requirements for a transition activity.
• Do No Significant Harm (DNSH) criteria: requirements designed to ensure that an activity does not cause significant harm to other environmental objectives.
• Minimum Social Safeguards (MSS): requirements covering areas including human rights, labour rights and responsible business conduct.

A key feature that distinguishes the Taxonomy from some international approaches is its approach to transition finance. As well as defining green activities, it provides pathways for transition activities in hard-to-abate sectors, reflecting the role these sectors will play in Australia’s transition to net zero.

The Taxonomy also reflects Australia’s specific context through its approach to First Nations peoples and cultural heritage. It is the first sustainable finance taxonomy globally to set expectations for engagement with First Nations peoples and the management of cultural heritage.

At the same time, the Taxonomy has been designed with international interoperability in mind. It draws on international approaches, including the EU Taxonomy, while adapting the framework to Australia’s economy and transition needs. The Australian Taxonomy places greater emphasis on transition pathways for hard-to-abate sectors, reflecting the importance of mining, metals, agriculture and critical minerals to Australia’s economy.

In March 2026, ASFI also released guidance on applying the Taxonomy to use-of-proceeds debt, including bonds and loans. The guidance sets out how issuers can apply and disclose Taxonomy alignment, and how the Taxonomy can be used alongside existing labelled debt standards and frameworks. This is intended to support greater consistency and comparability in Australia’s sustainable debt market.

How is the Australian Sustainable Finance Taxonomy being used?

More than a year after its launch, the Taxonomy is starting to be used in financing and investment decisions. ASFI has identified at least 11 publicly reported uses, with some of the clearest examples so far coming from labelled debt and capital allocation frameworks.

For example, the Taxonomy’s Technical Screening Criteria have been used in green bond issuances and incorporated into green bond and sustainable finance frameworks to help identify eligible activities and provide greater consistency around what can be classified as green.

ASFI has also tested the Taxonomy with financial institutions and investors across a broader range of uses, including:

• Financing: identifying eligible activities for green bonds, loans and other use-of-proceeds instruments, and assessing whether financed activities meet green or transition criteria.
• Investment and capital allocation: informing investment decisions and assessing the alignment of assets and portfolios with climate mitigation objectives.
• Due diligence and engagement: supporting transaction and investment due diligence and providing a common reference point for discussions with borrowers, investees and portfolio companies.
• Reporting and frameworks: informing sustainable finance and capital allocation frameworks, assessments of labelled bonds, and climate-related investment measurement and reporting.

These early applications show how the Taxonomy can be used at different stages of the investment and financing process, from identifying eligible activities and assessing investment opportunities to due diligence, financing and reporting.

What organisations are learning from early adoption

Early applications indicate that organisations are using the Taxonomy to bring greater rigour to investment and financing decisions. Rather than creating standalone sustainability processes, many are incorporating Taxonomy criteria into existing governance, capital allocation and due diligence frameworks to help assess opportunities, support sustainability claims and communicate more consistently with capital providers.

As lenders and investors place greater scrutiny on sustainability-related claims, a common framework can help reduce interpretation risk and improve confidence in how activities are assessed and communicated.

Australia in a growing global taxonomy landscape

The Taxonomy is part of a rapidly expanding global sustainable finance landscape. More than 50 national and regional taxonomies have now been developed globally, as governments and financial markets seek clearer and more consistent definitions of which economic activities can be considered green, sustainable or transition-aligned.

This development is particularly visible across Asia-Pacific. Alongside Australia, frameworks have been developed or expanded in markets including Singapore, Indonesia, Thailand, Malaysia and Hong Kong SAR, while the ASEAN Taxonomy provides a regional reference framework for sustainable economic activities.

As the number of taxonomies grows, interoperability is becoming increasingly important. Taxonomies do not need to be identical, but greater comparability between frameworks can help investors and financial institutions assess opportunities across markets, reduce unnecessary duplication and support cross-border sustainable finance. Australia’s Taxonomy was developed with international interoperability as a core consideration, drawing on approaches including the EU Taxonomy, while still reflecting the characteristics of the Australian economy and its transition needs.

This is already becoming a focus of regional collaboration. Recent work between Australia and China has explored greater taxonomy alignment to support cross-border capital flows, including recommendations for Australia to engage with regional mechanisms that make sustainable finance taxonomies easier to compare.

What’s next? Expanding the Taxonomy to adaptation and resilience

The Taxonomy currently focuses on climate change mitigation, but as mentioned earlier, ASFI has commenced work to explore how it could be expanded to cover climate adaptation and resilience. As physical climate risks increasingly affect infrastructure, assets and operations, there is growing interest from investors and financial institutions in identifying and financing activities that strengthen climate resilience.

Potential areas of focus include resilient buildings and infrastructure, climate-resilient agriculture, water efficiency and nature-based solutions.

Defining adaptation activities is not as straightforward as defining mitigation activities. While mitigation can often be assessed using measures such as emissions intensity or energy performance, whether an activity improves resilience depends on factors including location, exposure to climate hazards, vulnerability and future climate conditions.

Clear and consistent criteria could help organisations identify credible adaptation opportunities, support more consistent resilience-related claims and provide investors with greater confidence when assessing adaptation projects. Over time, this could support greater private capital investment in climate resilience.

Challenges and considerations

While the Taxonomy provides a useful framework, organisations may face practical implementation challenges. Demonstrating alignment often requires detailed technical data, asset-level information, climate risk assessments and governance processes. For many organisations, particularly in transition sectors, taxonomy alignment assessments may require new data collection and internal review processes.

Applying the Taxonomy in your organisation

The Taxonomy is voluntary, but there are practical steps organisations can take to understand where it may be relevant to their financing, investment and transition activities. Much of this work can also inform transition finance strategy, alongside broader transition planning, climate risk management and sustainability reporting. Key actions to consider include:

Identify where the Taxonomy is relevant	Review planned investments and financing activities against the Taxonomy criteria to identify where activities may qualify as green or transition-aligned, and where further information or action may be needed.
Build the Taxonomy into existing processes	Consider how the criteria could be used within sustainable finance frameworks, investment screening, capital allocation and transaction due diligence, rather than approaching Taxonomy alignment as a separate exercise.
Assess physical climate risk and adaptation needs	Assess where assets and operations are exposed to physical climate risks and identify where investment may be needed to strengthen resilience. For organisations in scope of ASRS, this can also build on the climate risk and resilience work required under AASB S2. This could become increasingly relevant as ASFI progresses its work on adaptation and resilience.
Strengthen data, evidence and governance	Understand what information will be needed to assess and demonstrate alignment with the Technical Screening Criteria, Do No Significant Harm requirements and Minimum Social Safeguards, and establish clear responsibilities for collecting and reviewing that information.

The Taxonomy may also become relevant to organisations through their lenders and investors. Early use of the framework has included transaction due diligence, investment assessment and engagement with customers and portfolio companies. Understanding how activities align with the Taxonomy can help organisations respond to questions from capital providers and identify potential sustainable finance opportunities.

Organisations can also begin preparing for the Taxonomy’s potential expansion into adaptation and resilience. Physical climate risk assessments, asset-level data and a clear understanding of planned resilience investments can all be developed before final adaptation criteria are in place.

How Anthesis can help

Organisations are increasingly being asked by lenders, investors and investment committees to demonstrate how projects, capital expenditure and financing activities align with credible sustainability frameworks. The Taxonomy provides a common framework for assessing this alignment.

Anthesis can help you:

• Assess Taxonomy alignment: Review activities, assets and investments against Taxonomy criteria and identify potential gaps or opportunities.
• Apply the Taxonomy to sustainable finance: Integrate the criteria into sustainable finance frameworks, investment screening, due diligence and capital allocation.
• Connect the Taxonomy with transition planning: Identify credible transition activities and opportunities for sustainable finance as part of wider transition planning.
• Prepare for adaptation and resilience: Assess physical climate risks, identify resilience priorities and develop potential adaptation investment opportunities.
• Strengthen supporting data and governance: Establish the information, evidence and processes needed to support credible Taxonomy assessments and sustainable finance claims.

By connecting the Taxonomy with climate strategy, risk management, investment and financing decisions, organisations can use it as a practical tool to support both the transition and longer-term climate resilience.