Australia is entering a period where climate risks are rising faster than national investment in resilience. Floods, fires, droughts, and storms are driving growing economic losses, insurance pressures, and infrastructure vulnerabilities. A new report from the Actuaries Institute concludes that Australia can no longer delay integrating climate adaptation into its sustainable finance taxonomy. Expanding the taxonomy would unlock private capital, guide public investment, and provide consistent national standards for adaptation activities.
Natural disasters currently cost Australia an estimated A$38 billion each year. By 2060, those losses are projected to reach at least A$73 billion as climate extremes intensify. These impacts are already slowing economic activity and pushing up insurance costs. Research from Finity shows that around three percent of bank loan assets could soon face unaffordable insurance, heightening risks for lenders, households, and the financial system.
Lead author Ramona Meyricke, actuary and principal at Taylor Fry, emphasizes that climate-related costs are rising much faster than adaptation investment. She explains that Australia lacks a coordinated national approach to resilience and that the scale of the challenge requires both public and private financing. Without updated frameworks, the country will face larger losses, higher recovery spending, and widening gaps in protection for vulnerable communities.
The Actuaries Institute recommends expanding the Australian Sustainable Finance Taxonomy to include clear definitions of climate adaptation, similar to the approach taken in the European Union. A taxonomy that formally recognizes adaptation would help standardize what qualifies as a resilience investment. It would also support targeted incentives through tax policy, subsidies, concessional finance, and government-backed cost-benefit evaluations. Clear definitions are essential for directing capital toward infrastructure upgrades, flood-resilient assets, nature-based solutions, and climate-ready building standards.
Climate Energy Finance director Tim Buckley notes that adaptation benefits are spread across entire regions and systems, making it unlikely the private market alone will finance the necessary upgrades. He stresses the need for government leadership to ensure that economic analysis properly values both the short-term and long-term benefits of adaptation. Without this, businesses and households will face rising costs as climate impacts deepen.
The Australian Sustainable Finance Institute (ASFI) also supports adding adaptation to the taxonomy. Financial institutions, including the Insurance Council of Australia, have expressed strong backing for credible adaptation and resilience criteria. ASFI CEO Kristy Graham points out that adaptation already creates economic value through avoided losses and stronger community outcomes. However, she warns that without policy clarity and investment frameworks, adaptation funding will continue to lag behind the scale of climate risk.
The Actuaries Institute further recommends the creation of a national adaptation investment framework led by the federal government and coordinated with states, territories, insurers, utilities, and major industries. Such a framework would help diversify funding sources, accelerate resilient infrastructure deployment, and support long-term planning for water systems, energy networks, transport corridors, agriculture, and coastal communities.
The Australian government has indicated it is open to expanding the taxonomy as part of its broader net-zero strategy. With climate impacts intensifying, integrating adaptation into sustainable finance policy has become a practical and strategic requirement. Without this shift, economic losses, insurance pressures, and community vulnerabilities will continue to rise.
Adding climate adaptation to the taxonomy would help Australia guide investment toward resilience, reduce long-term disaster costs, and protect the national economy in an increasingly volatile climate.
(Source: Thomasson, E. (2025, December 1). Australia should expand taxonomy to include climate adaptation, actuaries say. Green Central Banking. https://greencentralbanking.com/2025/12/01/australia-should-expand-taxonomy-to-include-climate-adaptation-actuaries-say.)
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