Australia’s sustainable finance agenda: Implications for corporate governance

by Dr Alice Klettner, Senior Lecturer, University of Technology Sydney, and Dr Scott Kelly Senior Lecturer, University of Technology Sydney, and Dr Melissa Edwards Senior Lecturer, University of Technology Sydney, and Dr Paul Brown Senior Lecturer, University of Technology Sydney
  • Sustainable finance refers to financial activity that integrates environmental, social and governance (ESG) factors and/or fosters sustainable development.
  • The cross-sector Australian Sustainable Finance Initiate (ASFI) will launch a roadmap in 2020 recommending pathways, policies and frameworks for sustainable finance.
  • ESG factors will become increasingly entrenched in both directors’ duties and the fiduciary duties of institutional investors.
  • The European Union is developing a taxonomy that will define sustainable economic activities and thereby direct finance towards corporate activities deemed sustainable.

Man pointing to finance data

Earlier this year, the authors of this article were involved in a research project aimed at assessing the state of play of sustainable finance in Australia. The project was supported by Climate-KIC Australia with funding from the European Union in the frame of the Strategic Partnerships for the Implementation of the Paris Agreement (SPIPA) program. It resulted in a report entitled Unlocking Australia’s Sustainable Finance Potential published in June 2019.1

This article draws on the findings of the report to explore the implications of the sustainable finance agenda for corporate governance. It provides a summary of international developments; an update on the Australian situation; and it highlights likely areas of change relevant to governance professionals.

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