In this context, the outcome of Australia’s federal election is a positive development. Kristy Graham, ASFI’s Canberra-based chief executive, explains: “We have made really strong progress in the last three years because industry and government have been pulling in the same direction. There is enthusiasm for continuing this pace and scale of reform, because these conditions will continue to exist for at least the next three years.”

However, despite all the progress there is much left to do if ASFI’s ultimate vision – to shape the local financial system to support a sustainable, inclusive and resilient Australia – is to be achieved. The Australian Sustainable Finance Action Plan, which ASFI launched in a webinar with Australian sustainable finance leaders on 15 May, sets out a path to the ultimate goal (see box).

The context for further sustainable finance development in Australia is a complex political environment thanks to anti-ESG [environmental, social and governance] sentiment in the US and tariffs that threaten global growth, and also the EU’s streamlining of climate finance regulation.

But there is still confidence that the global picture has not been enough to endanger domestic progress. Graham said ASFI’s partner organisations and members – many of which operate internationally – are becoming increasingly adept at navigating geopolitical complexities because they recognise sustainability is commercially valuable and imperative.

Nayanisha Samarakoon, head of policy and advocacy at Responsible Investment Association Australasia (RIAA), said members are yet to drop RIAA certification in fear of backlash. “We have members headquartered in the US. Not only have they not revoked products that have been certified but they have also   applied for more certification,” she said.

Rebecca Mikula-Wright, Investor Group on Climate Change (IGCC)’s chief executive, said IGCC’s State of Net Zero Investment 2025 reportdemonstrates that 94 per cent of investors continue to consider climate risks and opportunities in their general investment approach while 72 per cent have interim targets across their portfolios.

“They are connecting investment decision-making with legal obligations to safeguard long-term returns and enable them to position for opportunities in the transition to a low-carbon economy,” she said. “There has also been an increase in how physical risk and resilience is being managed: 90 per cent of investors have dedicated strategies to address fossil-fuel investment through exclusions, negative screening and stewardship.”

However, the global picture has made information harder to come by, Samarakoon suggested. “We rely a lot on public information. When there is a desire to avoid scrutiny, it means we see less of this information.”

Webinar participants argued that Australia has been the fastest-moving market for climate policy progress over the past three years. This has helped it to catch up to global peers and makes it a more attractive investment designation, Mikula-Wright suggested. However, for all the gains there are still elements to lock in to ensure Australia wins investor confidence.

Kazuma Osaki, head of APAC policy at Principles for Responsible Investment, said the Labor government’s licence and mandate comes at an important inflection point for the energy transition.

He said: “Investors require certainty on real-economy and sustainable-finance policy settings. The real-economy settings directly correlate to the outcomes they are able to achieve.”

For instance, Osaki continued, a significant portion of Australia's coal-fired power plants are approaching the end of their operational lives and, as these assets near retirement, there is a unique opportunity to replace them with renewable energy sources and storage solutions that align with government targets.

In this way, the government’s ability to follow through on its net-zero commitments with steady progress will be an important factor in building investor confidence and leadership, Osaki continued. “There may be an opportunity to establish lasting policy structures, such as enhancing the Climate Change Act for further confidence and clarity,” he added.

International collaboration remains important despite changing political currents. Osaki noted that Australia is one of a cohort of pro-net-zero governments, many of which have a similar export-heavy economic profile. These include Canada, which had a similar election outcome in the form of the re-election of a centre-left government.

“I would possibly go as far as to say there is strong and healthy competition among nearby governments to assume a leading role in the regional transition for the Asia-Pacific region. Japan, China and Hong Kong are ahead of the curve in some areas of the transition finance agenda, relative to Australia,” Osaki added.

Meanwhile, Mikula-Wright said the Asia region is rapidly strengthening its policies and regulations for climate and ESG while competing for capital. “[Asian countries] are increasingly investable for green investors seeking returns from the transition,” she said. “Australia needs to make an active effort to realise this. We can't just say we've got everything here. It’s about getting the right technology solutions coupled with the policy development to realise the potential we know we have. There is still plenty of work to do.”

Australia’s rapid climate policy development gives sustainable finance practitioners some confidence in its ability to play a leading role on the global stage. There are high expectations that an Australia-Pacific hosted COP31 summit will contribute to the country’s ambitions. But there is still work to be done.

Osaki said there is yet to be a regional or global approach to act as a ‘north star’ in driving transition. Australia can lead by proving practice and examples that reflect high ambition. “Australia is yet to comprehensively develop and connect a lot of net-zero transition and financing policies, tools and regulations. It needs to get its house in order before it is able to play that leading role,” he said.

On the other hand, Osaki said Australia’s work on social licence and First Nations engagement could make COP31 an important and timely addition to the transition conversation. “Australia is uniquely positioned to bring the social licence aspect, Indigenous engagement and just transition principles into the APAC transition finance conversation,” he said.

COP31 in Australia – and subsequent COP presidency – would be a once-in-a-lifetime opportunity, Graham added. “This is something we [would] need to take advantage of and use for the benefit not just of Australia but for the transition of the rest of the world,” she said.

Graham also suggested Australia could spearhead a transition finance standard. “This is a nut that is yet to be cracked. But ultimately we need a lot more capital flowing not just to what we all know is green, but to what will support and accelerate the transition.”

Likewise, Graham said, with the US stepping away from the area, Australia can use climate finance more strategically than it has ever needed to or had the ability to do previously. This would support green export ambitions and green industrialisation and decarbonisation in southeast Asia.

Doing this will require more than public finance – and Graham suggested a bilateral green bank could be a good way to approach this. ‘We need to use blended finance in a much more coherent, strategic way and at a greater scale than previously,” she said. “There is a huge opportunity.”