Australia's sustainable finance taxonomy to help usher in green bonds for miners

Australia's first sustainable finance taxonomy is expected to provide much-needed transparency for financiers and open up a new market of green capital for miners.

Launched June 17, the Australian sustainable finance taxonomy is the world's first to include minerals, mining and metals. It also sets expectations for engagement with First Nations peoples and cultural heritage management.

It aims to facilitate green financing, including green bonds, for miners by providing financiers confidence in the sustainability of miners' products, Samantha Langley, head of sustainability at Vulcan Energy Resources Ltd., told Platts July 1 on the sidelines of the Future of Mining Australia conference in Perth, Australia. Platts is part of S&P Global Commodity Insights.

The taxonomy was built by an independent expert decision-making body with strategic oversight from the Australian Treasury and financial regulators. It is being piloted by the Australian Sustainable Finance Institute (ASFI) alongside banks ANZ Group Holdings Ltd., Commonwealth Bank of Australia, National Australia Bank Ltd., Rabobank and Westpac Banking Corp.; superannuation funds HESTA and Rest; Moody's Ratings; and the federal government's Clean Energy Finance Corp.

It will also boost institutional investor confidence in the sometimes opaque critical minerals markets.

Roderick Crowther, corporate development manager at base metals producer Wyloo Pty. Ltd., told a July 1 panel that the appetite for equity in critical minerals projects has dropped significantly in the last 12 to 24 months.

In such an environment, financial taxonomy is "essential for investment" as it provides a "clear, standardized classification system that helps investors identify, compare, and allocate capital to sustainable and economically relevant activities with confidence," said Neil van Drunen, head of national policy at the Association of Mining and Exploration Companies.

"Financial taxonomy helps grow a new market by creating a shared language and transparent criteria that reduces ambiguity, attracts investor trust, and guides capital flows toward emerging sectors," van Drunen told Platts in a July 2 email.

"This is especially in areas like green technologies, sustainable infrastructure, or innovative industries that benefit from being clearly defined and recognized. It's like giving a new market a well-drawn map: Investors know where they're going, what to expect, and how to measure the impact."

The UK-based Climate Bonds Initiative announced it will expand its Certification Scheme to include criteria, pathways and measures in the Australian taxonomy consistent with the Climate Bonds Standard. The initiative screens self-labeled green bonds against a science-based methodology to ensure they align with climate goals, environmental impact and minimum safeguards.

Comparisons to EU taxonomy

Langley said the EU's taxonomy is "very prescriptive and very stringent on its requirements under the Sustainability Environmental Objectives, compared to Australia's taxonomy. "

Vulcan is presently working towards alignment with the EU taxonomy as its Lionheart lithium project is in Germany, Langley said. Lionheart is Europe's largest lithium resource, and Vulcan already has conditional commitments for about €879 million from several banks, including the European Investment Bank, according to Langley.

Australia's taxonomy defines how economic activities and entities are considered: "green" for those already aligned with net zero or "transition" for those on a credible pathway to net zero, multinational law firm MinterEllison said in a June 23 statement.

"Activities like low-carbon cement or steel production may qualify as 'transition' if, among other things, they meet emissions intensity benchmarks and have credible decarbonization plans," the law firm said.

The EU issued draft revisions to its taxonomy in January to include mining and refining activities for lithium, nickel and copper mining, which will be "ring-fenced for the downstream use of sustainable economic activities and excludes seabed mining" along with coal, lignite, oil and gas, according to the EU's document.

Vulcan appointed Natixis Corporate & Investment Banking in July 2024 to structure its first green financing aligned with the International Capital Market Association's Green Enabling Projects Guidance, published the month before.

Vulcan expects to close on its financing by the end of 2025 for the approximately Eur2.2 billion it needs to start production at Lionheart in 2028.