Sustainable Finance Taxonomy
A sustainable finance taxonomy is a common set of criteria and transparent, credible and comparable standards, that together can help financial institutions to align capital allocation and investments to meet sustainable goals.
Westpac aims to play its part in financing and facilitating activities that contribute to climate, environmental and social outcomes. We are working to develop a Westpac Sustainable Finance Taxonomy, which will underpin and inform a new sustainable finance target that aligns with our Sustainability Strategy and commitments. Our taxonomy will support us to make responsible decisions about how and what we finance, and provide a classification tool to measure progress against the target we set.
Discussion paper
We welcome the Australian Government’s support and close engagement with industry on the development of a national taxonomy, acknowledging it will take time for industry and Government to work together to formulate and design it. In the interim, our aim is to progress with developing a taxonomy that is tailored to our business, which is complementary to the work already underway and seeks to be consistent and aligned.
We have prepared a discussion paper (PDF 285KB)that sets out our initial views, challenges and considerations in developing our taxonomy. Given the complexities of developing taxonomies, we anticipate the process will be iterative and expect to take a stepped approach as we prioritise sectors for criteria development and publication.
We welcome feedback and questions on our discussion paper, which can be addressed to sustainability@westpac.com.au.
Developing our Sustainable Finance Taxonomy: Discussion Paper (PDF 285KB)
FAQs
Sustainable lending, like sustainable investing, means that ESG considerations play a crucial role in all decision making. There are many examples of sustainable lending products. Most banks today are not yet ready to take full advantage of the opportunities that sustainable lending offers.
What is sustainable finance and investment? ›
Sustainable finance is an overarching term referring to the investment process accounting for and promoting environmental and social factors, as illustrated in the image above. While covering a broad swath of activities, we will focus on a subset of sustainable development: environmental or green finance.
What is sustainable lending? ›
An SLL can be used for any purpose but differs from a typical loan as it gives incentives to the Borrower to achieve their sustainability performance targets, commonly in the form of a reduction in interest rate.
What is ESG in lending? ›
Environmental, social and governance (ESG)
What does sustainability mean in investment? ›
Sustainable investing refers to types of investments that aim to generate long-term financial returns while advancing sustainable outcomes.
What is the difference between ESG and sustainable finance? ›
While sustainability and ESG are closely related concepts, they have distinct focuses and governance implications. Sustainability takes a broader, holistic view, encompassing environmental, social, and economic dimensions, while ESG provides a structured framework for evaluating specific performance criteria.
What is an example of sustainable investing? ›
Select specialized sustainable ETFs
Some exchange-traded funds focus on specific sustainability themes like renewable energy, water conservation, or gender equality. Example: Buy shares of the “Invesco Solar ETF (TAN),” which invests in solar energy companies.
What are the types of sustainable lending? ›
Examples of sustainable finance initiatives include:
- Social impact bonds / Pay for success (PFS) schemes.
- Sustainable investment funds.
- Social venture capital.
- Public institutional equity investing.
There is a potential for “greenwashing”
Some companies may make claims about their ESG practices that are not fully supported by their actions which can lead to “greenwashing”. This may make it difficult for you as an investor to identify truly sustainable companies.
Does sustainable financing mean only lending? ›
Answer: It is false. Explanation: Sustainable financing is a process of taking environment, social and governance ,While green sectors is focus on resort in the natural environment.
Banks need ESG information to meet their risk management and compliance obligations. But much of that underlying data can be harnessed to support other ESG activities such as reporting and disclosures and sustainability finance.
What are the examples of ESG loans? ›
What form do ESG loans come in?
- Short-term facilities.
- Bridge loans.
- Capex facilities.
- Export credits.
- Revolving credit facilities.
- Standby letters of credit.
- Term loans as well as so-called… Schuldschein – which are German unlisted private placements that are technically loans but share bond-like characteristics.
The term ESG first came to prominence in a 2004 report titled "Who Cares Wins", which was a joint initiative of financial institutions at the invitation of the United Nations (UN).
Why do investors want sustainability? ›
Sustainable investing promotes long-term economic growth by encouraging companies to operate more ethically and responsibly. It helps protect the environment by directing capital towards sustainable practices and technologies.
What funds are considered sustainable investments? ›
There are various types of sustainable funds, such as Equity Funds, Fixed Income Funds, Balanced Funds, Index Funds and ETFs, and Thematic Funds. Each type of fund focuses on different asset classes, investment strategies, or sustainability themes.
What is the sustainable investment rule? ›
70% asset rule: 70% of the gross value of the assets must be invested in accordance with its sustainability objective and firms must also identify and disclose other assets held for other reasons (e.g., cash, derivatives).
What is the difference between sustainable finance and impact investing? ›
Sustainable finance is focused on integrating ESG factors into financial decision-making processes, while impact investing is focused on making investments specifically aimed at generating positive social and environmental impact.
What is ESG investing and why is it important? ›
Environmental, social, and governance (ESG) investing is used to screen investments based on corporate policies and to encourage companies to act responsibly. Many brokerage firms offer investment products that employ ESG principles.
