This publication, ‘A Legal Framework for Impact, Australia: Integrating Sustainability Goals across the Investment Industry’, builds on the groundbreaking 2021 report ‘A Legal Framework for Impact’ (LFI) which analyzed, across 11 jurisdictions, the measurement where investors can pursue sustainability goals from a legal perspective and options for policymakers seeking to help investors do so.

The 2021 report, written by law firm Freshfields Bruckhaus Deringer and commissioned by the PRI, UNEP FI and the Generation Foundation, found that in all 11 jurisdictions, including Australia, investors are broadly licensed by their regulatory environment to consider shaping the sustainability outcomes of their investments where this would support their financial return objectives. However, the report noted a lack of clarity, guidance and adequate tools to help investors shape sustainability outcomes. The LFI project is currently developing roadmaps for reforms in five jurisdictions – Australia, Canada, EU, Japan and the UK.

Latest Australia-focused report provides recommendations for such reforms, with the aim of helping traditional investors support an effective net-zero transition for the wider economy and tackle critical sustainability issues , in the best interest of clients and members of the fund.

Commenting on the report, David Atkin, PRI CEOsaid: “Australia is another G7 country tackling climate change. With a new government on board, we expect many policy reforms this coming year that will bring the Australian market closer to leading economies in sustainable finance reform. Sustainable finance is not optional and climate change cannot be suspended.

Fundamentally, tackling climate change and building a prosperous and resilient future begins with reforming the law: how investors’ duties are understood by market participants; how active ownership is facilitated; and how the interests of beneficiaries are understood and managed. This is one of the main goals of the Legal Framework for Impact project – to propose policy changes that will alter the basis of financial regulation and that can help responsible investors redirect capital flows onto a viable and inclusive path to zero. net.

The report dives into the Australian context, exploring policy barriers in Australia that limit the ability of institutional investors to pursue sustainability goals. In doing so, the PRI makes five recommendations to Australian policy makers:

  1. Update standards. Update standards and guidelines to clarify investor duties to address system-level risks related to sustainability.
  2. Adopt a reporting framework. Adopt a comprehensive corporate sustainability reporting framework.
  3. Strengthen regulatory support for stewardship. Strengthen regulatory support for effective investor management.
  4. Implement a taxonomy. Implement an Australian Sustainable Finance Taxonomy.
  5. Dealing with the effects of heatmaps and financial performance testing. Discuss the effects of product heatmaps and financial performance testing of investor actions on sustainability outcomes.

Moving forward, the report identifies two policy areas that require further study by Australian policymakers:

  1. Ways to allow investors to take into account the preferences of beneficiaries in terms of sustainability;
  2. Ways to approach the treatment of sustainability results in investment management agreements.