Australia plans to launch its first sovereign green bonds

May 1, 2023|Written by Scott Speer|Reserve Bank of Australia

Australia is set to launch the nation’s first sovereign green bonds in 2024, Treasurer Jim Chalmers announced at an investor roundtable event in Brisbane last week.

The programme aims to create climate finance investments, “enabling investors to back public projects driving Australia’s net-zero transformation and boosting the scale and credibility of Australia’s green finance market”. This pledge follows the creation of a legally binding target to cut carbon dioxide emissions by 45% from 2005 levels by 2030, which was set earlier this year.

Managed by the Australian Office of Financial Management, the green bonds programme will begin once a framework has been developed, although any indication of the programme’s size or eligibility criteria was not discussed.

In addition to the green bonds, the government also pledged to co-fund the initial development phase of an Australian sustainable finance taxonomy which seeks to ensure common standards and definitions for sustainable activities and assets.

Line graph showing per capita emissions of the G20 countries
Australia is one of the highest per capita emitters of CO2 in the G20 © Climatewatch

Long regarded as a climate laggard, Australia is one of the highest emitters of carbon dioxide per capita within the G20. However, under the Labour government elected in May 2022, Australia is now increasing attention towards policies seeking to align with the Paris Agreement. In an effort to attract green investment and crack down on greenwashing, the government has also provided an additional $4.3mn to expand surveillance on businesses making claims about sustainability.

Proactive steps on climate change have however been questioned in a recent independent review of the Reserve Bank of Australia (RBA). According to the review, the RBA should acknowledge climate risks but avoid using monetary policy as a means of tackling them.

The review also states that the RBA should continue to integrate climate change implications into its analyses and “contribute more generally to the effective regulation of banking and finance on climate risk and natural capital management”, but stressed that an explicit objective of monetary policy should not include the transition to a low-carbon economy.

Citing Isabel Schnabel of the European Central Bank, the review argues that using monetary policy tools such as green bonds to pursue climate-related objectives would involve substantial trade-offs for the RBA’s mandate of price stability and full employment.

According to the review, clarifying the objective of promoting economic prosperity and welfare is crucial for a successful transition towards a low-carbon economy. The review proposes that by explicitly articulating this mandate to encompass both short-term and long-term initiatives, the current objective provides a solid foundation for the transition.

This page was last updated May 1, 2023

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