Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 501

A helping hand for Treasurer Chalmers’ proposed taxonomy

In his recent Monthly Essay, Treasurer Jim Chalmers stated:

“we will create a new sustainable finance architecture, including a new taxonomy to label the climate impact of different investments. That will help investors align their choices with climate targets, help businesses who want to support the transition get finance more easily, and ensure regulators can stamp out greenwashing. This strategy begins with climate finance, but over time I see it expanding to incorporate nature-related risks and biodiversity goals”.

To assist the Treasurer in this process we offer the following (slightly tongue in cheek) suggestions, sometimes going beyond the climate risk focus to address the two additional goals stated:

Guilt-edged securities: All securities that are not aligned with the government’s climate agenda. These are to be traded on Under-the-Counter Markets. Authorized dealers on these markets to be required to wear dirty white raincoats whenever conducting trades.

Donor promissory notes: A form of stapled security to be stapled to the receipts for significant donations to major political parties. The promise is hot air additional to that from global warming. Attractive to short sellers wanting to hedge against increases in temperature.

Mezzanine finance: A category of investment that offers an element of protection against the risks of flooding caused by severe rainfall events and rising sea levels. A handy alternative to floating-rate securities.

WINDUP bonds: thought by many unsophisticated investors to be providing financing for, and returns from, operations of wind turbines, but actually designed to avoid any liability of the issuer upon the failure and wind-up of the operating entity. Also known as Kamikaze bonds, after the Japanese term for ‘Divine Wind’.

GAPs: Good Advice Providers who leave gaping holes between their advice and that which would be in the best interests of their clients.

BNNPL: Buy Now Never Pay Later vehicles, a once-off chance for negligible net worth (NNW) people to make a little purchase with no interest charged and no principal repayment required. Only those holding equity in the providers stand to lose.

SOLAR securities: Source of Life and Riches securities. To be issued by triple-D rated solar panel operators supposedly to finance their businesses, with the promised riches accruing to the issuer and extracted prior to default.

Down-under bonds: For financing underground carbon capture operations. Not to be confused with underwear products bearing a similar labelling.

NUKE floaters: Nuclear Und Kinetic Energy floating rate notes. Issued for nuclear power financing. These are investments with a half-life longer than the average investor and are guaranteed to be around for a very long time. Have the added advantage that they can be seen in the dark.

CALMs: Carefully Aimed Laundering of Money facilities. Arrangements guaranteed not to be caught by AUSTRACs AML activities. Should be popular with Gambling Operators and Payments Providers. All waste-products left from the laundering to be sequestered to protect the ecosystem.

DINGO bonds: Driven into near extinction in the early 1980s, the remains of some specimens of these financial derivatives are believed to be held in a number of private collections. If enough of the DNA can be extracted, recent advances in cloning techniques might mean that it is feasible for a reintroduction of these uniquely Australian creatures into our environment – a precious positive for biodiversity!

Fungible financial products: The descriptor ‘fungible’ should henceforth be used only in cases where there is a direct and quantitatively significant nexus with the production and promotion of naturally occurring species of fungus identified as priorities in the government’s published biodiversity goals. Investors should not be kept in the dark about the merits of such products.

Short-term investments: All financial instruments and investment vehicles which have a maturity date which is earlier than the year identified by the government as the target year for net-zero emissions should be clearly labelled as being short-term. The RBA and Commonwealth Treasury should only describe bonds as ‘long dated’ where conformity with this aspect of the new taxonomy applies.

Insurance product nomenclature: All insurance products which provide cover against nature-related risk must be 100% explicit about the risks they are providing safeguards and /or guardrails against. Consistent with this, life insurance products should be relabelled ‘death insurance’.

Pro-cyclicals: The terms ‘counter-cyclical’ and ‘anti-cyclical’ will be gradually phased out. Cycles and cyclists need to be encouraged to reduce carbon emissions. Greater numbers of MAMILs will align with the government’s bio-diversity goals.

CCS Forestry MIS: Managed Investment Schemes to provide retail investors with part ownership of forestry developments aimed at harvesting carbon credits from the planting of trees for carbon capture and sequestration. Double jeopardy may be involved – the Timbercorp and Great Southern MIS disasters of a decade ago spring to mind, while the delivered social value of carbon credits is unclear.

Centigrade futures: Futures contracts with payoffs based on the difference between the year-average temperature in 2050 and that in the year the contract opens. Pessimists on climate change can go long and use profits to offset heat induced misery. Climate sceptics could put their money where their mouth is by going short and publicize the fact that they are doing so.

 

Owen Covick is a Research Associate at the South Australian Centre for Economic Studies, and Kevin Davis is Emeritus Professor of Finance at The University of Melbourne. Kevin’s free e-text reference book 'Bank and Financial Institution Management in Australia' is available on his website. Kevin was also a member of the Financial Systems Inquiry ('The Murray Report') in 2014.

 

RELATED ARTICLES

CPI lowballs the true cost of living

Six ways the Budget Office is probing super taxes

7 questions, 70 opinions on major policies facing Australia

banner

Most viewed in recent weeks

Australian stocks will crush housing over the next decade, one year on

Last year, I wrote an article suggesting returns from ASX stocks would trample those from housing over the next decade. One year later, this is an update on how that forecast is going and what's changed since.

What to expect from the Australian property market in 2025

The housing market was subdued in 2024, and pessimism abounds as we start the new year. 2025 is likely to be a tale of two halves, with interest rate cuts fuelling a resurgence in buyer demand in the second half of the year.

Howard Marks warns of market froth

The renowned investor has penned his first investor letter for 2025 and it’s a ripper. He runs through what bubbles are, which ones he’s experienced, and whether today’s markets qualify as the third major bubble of this century.

The perfect portfolio for the next decade

This examines the performance of key asset classes and sub-sectors in 2024 and over longer timeframes, and the lessons that can be drawn for constructing an investment portfolio for the next decade.

9 lessons from 2024

Key lessons include expensive stocks can always get more expensive, Bitcoin is our tulip mania, follow the smart money, the young are coming with pitchforks on housing, and the importance of staying invested.

The 20 most popular articles of 2024

Check out the most-read Firstlinks articles from 2024. From '16 ASX stocks to buy and hold forever', to 'The best strategy to build income for life', and 'Where baby boomer wealth will end up', there's something for all.

Latest Updates

Investment strategies

The perfect portfolio for the next decade

This examines the performance of key asset classes and sub-sectors in 2024 and over longer timeframes, and the lessons that can be drawn for constructing an investment portfolio for the next decade.

Shares

The case for and against US stock market exceptionalism

The outlook for equities in 2025 has been dominated by one question: will the US market's supremacy continue? Whichever side of the debate you sit on, you should challenge yourself by considering the alternative.

Taxation

Negative gearing: is it a tax concession?

Negative gearing allows investors to deduct rental property expenses, including interest, from taxable income, but its tax concession status is debatable. The real issue lies in the favorable tax treatment of capital gains. 

Investing

How can you not be bullish the US?

Trump's election has turbocharged US equities, but can that outperformance continue? Expensive valuations, rising bond yields, and a potential narrowing of EPS growth versus the rest of the world, are risks.

Planning

Navigating broken relationships and untangling assets

Untangling assets after a broken relationship can be daunting. But approaching the situation fully informed, in good health and with open communication can make the process more manageable and less costly.

Beware the bond vigilantes in Australia

Unlike their peers in the US and UK, policy makers in Australia haven't faced a bond market rebellion in recent times. This could change if current levels of issuance at the state and territory level continue.

Retirement

What you need to know about retirement village contracts

Retirement village contracts often require significant upfront payments, with residents losing control over their money. While they may offer a '100% share in capital gain', it's important to look at the numbers before committing.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.