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Australia should expand the country’s sustainable finance taxonomy to include climate adaptation to encourage private investment in protecting communities and business from droughts, fires and floods, according to a new report.
The Actuaries Institute, the professional body for actuaries in Australia, said the country is significantly underinvesting in climate adaptation and needs a coordinated national strategy to mobilise investment into adaptation measures such as more resilient infrastructure.
Natural disasters already cost the Australian economy A$38bn a year, with the figure set to rise to at least $73bn by 2060, the report said.
“This increasing climate-driven cost and disruption is already a drag on economic activity and pushing up insurance costs. But we aren’t investing anywhere near what’s needed to match the scale of the climate risks facing Australia,” said the report’s lead author Ramona Meyricke, actuary and a principal at Taylor Fry.
Insurance costs are soaring for home owners in Australia as climate change leads to floods, fires and storms, pushing up inflation and threatening financial stability, experts say. Roughly 3% of bank loan assets are likely to have unaffordable insurance, according to research from Australian analytics firm Finity.
The Australian Sustainable Finance Taxonomy should include clear definitions of adaptation, as the EU has done, the report by the Actuaries Institute said.
“This is particularly important where the government needs to incentivise adaptation activities by providing specific treatment in taxation, subsidies, financing or cost-benefit analysis,” it said.
Tim Buckley, director of Australian thinktank Climate Energy Finance (CEF), noted the actuaries recommend that national and state treasuries should review their analysis methodology to make sure that the costs and benefits of adaptation projects are fairly valued.
“Adaptation cost and benefits are spread across stakeholders and whole-of-system resilience matters, so this will need to be led by the government serving the public needs overall, rather than relying on the private market to solve anything, given this is ultimately about outsourcing business costs onto everyone else,” Buckley said.
Credible adaptation and resilience criteria are essential to unlock private capital and support long-term risk reduction across the economy, according to a recent report by the Australian Sustainable Finance Institute (ASFI).
The ASFI said such a move was widely supported by financial institutions, including by the Insurance Council of Australia.
“Adaptation is already delivering economic value through avoided losses and stronger community outcomes, but without the right frameworks in place, investment will continue to lag,” said ASFI CEO Kristy Graham. “Expanding the taxonomy is a practical and necessary step to help direct capital toward activities that reduce long-term climate and disaster costs.”
The Actuaries Institute also called for the government to coordinate a national adaptation investment framework with states and territories and other major stakeholders, to help grow and diversify revenue streams to fund adaptation.
The Australian government has signalled it is open to expanding the taxonomy to include adaptation in its net-zero plan.
This page was last updated December 1, 2025
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Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
