Australia’s Green Finance Framework Raises the Bar for Mining Worldwide
Australia has taken a decisive step onto the world stage by launching the first sustainable finance taxonomy that doesn’t shy away from including mining.
As the world’s demand for minerals and metals surges with the green transition, this bold initiative could serve as a global template for other resource-rich nations grappling with how to square sustainability with extractive industries.
It’s a game-changing move. Countries like Chile, Indonesia, Canada, and South Africa, all key players in the mining world, are now eyeing Australia’s framework with interest. Even the European Union, traditionally at the forefront of green regulation, is still fine-tuning its criteria for what counts as a “green” mining project. Australia, by contrast, is already forging ahead.
A Taxonomy with Teeth
What sets Australia’s taxonomy apart is its sheer ambition and clarity. Developed by the Australian Sustainable Finance Institute (ASFI) in partnership with the Treasury, the taxonomy defines a wide scope of economic activities that contribute positively to climate change mitigation. Crucially, it offers both green and transition classifications, recognising not just the end state, but the path towards it.
At its core, the taxonomy aims to do three things:
- Direct capital toward low- and zero-emission activities.
- Provide a credible system for assessing sustainability claims.
- Ensure consistency with Australia’s commitment to net zero by 2050.
And this isn’t just lip service. As ASFI explains: “The taxonomy will make it easier for financial institutions to identify investment and lending opportunities… and reduce transaction costs by providing clarity on whether a transaction is contributing to Australia’s climate change mitigation goals.”
Mining Included, Not Excused
Where most green frameworks tread carefully around mining, Australia’s dives in. The inclusion of the “Minerals, Mining and Metals” sector in the taxonomy marks a global first. It acknowledges a reality few wish to confront: we can’t build the future – electric vehicles, wind turbines, solar panels – without mining the materials for it.
Rather than greenwashing, the taxonomy lays out hard criteria for mining projects to be considered for green finance. Projects must:
- Demonstrate alignment with a 1.5°C climate pathway.
- Minimise environmental harm via Do No Significant Harm (DNSH) safeguards.
- Adhere to Minimum Social Safeguards (MSS), including respect for First Nations rights.
ASFI isn’t pulling punches. Mining projects that don’t meet strict emissions thresholds or fail to implement best-in-class practices won’t get the green stamp.
Green and Transition Classifications
The taxonomy breaks new ground with its dual-path classification system:
- Green Classification is reserved for low- or zero-emission activities. These must meet stringent emissions intensity thresholds, such as the 100g CO₂e/kWh target for renewable energy by 2030.
- Transition Classification applies to high-emitting sectors (like mining or cement manufacturing) that lack ready low-emission alternatives. Here, the focus is on credible decarbonisation plans and technology adoption, with sunset clauses to keep the pressure on.
In essence, the framework accepts that some industries can’t switch to zero emissions overnight. Instead, it creates a roadmap for progress—with clear deadlines.
How It Works
The taxonomy is more than a checklist. It’s a comprehensive tool designed for multiple use cases:
- Activity-level: Entities can screen projects to determine their eligibility for green finance, grants, and subsidies.
- Entity-level: Companies can calculate the share of their revenue, CapEx, and OpEx that is taxonomy-aligned, providing transparency to investors.
ASFI outlines: “The taxonomy can be used to demonstrate how an entity, portfolio or financial institution is transitioning over time towards taxonomy-aligned investments and revenues.”
This is especially useful in building trust across capital markets and weeding out greenwashing.
Why This Matters
Australia’s taxonomy lands at a time when sustainable finance is coming under intense scrutiny. Investors are increasingly demanding clarity, while regulators in Europe and North America are tightening the screws on ESG claims.
But few frameworks have dared to integrate mining in such a transparent and practical manner. The EU’s taxonomy, for instance, has faced criticism for being overly restrictive and difficult to apply to real-world transition industries.
By contrast, Australia’s approach is pragmatic, science-based, and tailored to its industrial reality. It recognises that decarbonising the economy involves more than just funding solar farms—it means greening the backbone of resource supply chains.
Built on Science, Not Spin
At every stage, the taxonomy draws from robust modelling. Its thresholds and benchmarks are anchored in internationally recognised pathways, including:
- The IEA Net Zero Emissions by 2050 Scenario (NZE2050)
- CSIRO’s 1.5°C Rapid Decarbonisation Scenario
- Climateworks Centre’s Australian 1.5°C scenario
All these are adapted through the AusTIMES modelling system to fit Australia’s economic and environmental context.
And that’s critical. As one stakeholder put it: “Aligning with global capital markets is important—but it’s just as vital that the taxonomy works for Australian industries.”
Recognising Indigenous Knowledge and Land Stewardship
One of the taxonomy’s standout features is its integration of First Nations perspectives. It doesn’t merely pay homage—it embeds Indigenous-led practices within its environmental objectives.
“Elevating and integrating First Nations-led traditional practices is critical to the achievement of biodiversity, water resource protection, and land conservation goals,” the document states.
This approach aligns with Australia’s broader commitment to equitable climate action and restoration, especially through activities like savannah management and land rehabilitation.
Six Environmental Objectives
While climate change mitigation is the immediate focus, the taxonomy’s architecture allows for expansion. Future iterations are expected to add technical screening criteria for:
- Climate change adaptation and resilience
- Biodiversity and ecosystem protection
- Sustainable water use
- Pollution prevention
- Transition to a circular economy
Each of these areas already informs the DNSH criteria, ensuring a holistic approach to sustainability.
Next Steps and Policy Integration
The Australian Government isn’t treating this taxonomy as a shelf document. It’s embedded within a wider Sustainable Finance Roadmap that includes:
- Mandatory climate disclosures from 2025
- Green bond frameworks (Australia’s first sovereign green bond raised A$7bn in 2024)
- Standards for sustainable investment product labelling
Over time, the taxonomy may evolve from a voluntary standard to a cornerstone of regulatory compliance and capital allocation.
As the Treasury puts it: “The taxonomy provides an important source of guidance and consistency… improving transparency and supporting the development of credible sustainable finance products.”
Why It’s a Model for the World
The Australian taxonomy doesn’t duck the hard questions or pretend that all green finance fits into tidy categories. It faces up to the realities of transitioning complex economies, and offers a path forward.
Mining isn’t ignored or demonised. It’s challenged to do better, and supported in getting there. That’s a critical evolution in the ESG space.
And it’s precisely why this framework could be replicated in other resource-heavy nations. Whether in Latin America, Southeast Asia, or Southern Africa, countries now have a working model that acknowledges the messy, necessary role of extractive industries in the green transition.
Digging for a Greener Future
If sustainable finance is to meet the scale of the climate challenge, frameworks like Australia’s will need to become the rule, not the exception. It offers clarity without rigidity, ambition without idealism, and urgency without panic.
In doing so, it sets the gold standard—not just for mining, but for sustainable finance itself.
