Green Funds Australia 2025: Sustainable Investing & Policy Updates

Australia’s investment landscape is going green, fast. Green funds—investment vehicles that prioritise environmental outcomes—are on the rise, fuelled by new policies, investor demand, and an urgent need to address climate change. But how do green funds work, what’s changed in 2025, and how can you harness them for both returns and positive impact?

What Are Green Funds and Why Are They Gaining Traction?

Green funds are managed investment products that allocate capital to companies, projects, or assets with clear environmental benefits. Think solar farms, wind energy, sustainable agriculture, and businesses with strong ESG (Environmental, Social, Governance) credentials. Unlike traditional funds, green funds use strict criteria to ensure their investments are genuinely making a difference—not just greenwashing.

• ESG Screens: Green funds use rigorous environmental standards to select investments, excluding fossil fuels and prioritising renewables, recycling, and sustainable tech.

• Certification: Many funds seek certification under standards such as the Responsible Investment Association Australasia (RIAA) or the Climate Bonds Initiative.

• Performance: Recent data shows that many green funds are matching or even outperforming traditional funds over the past five years, driven by strong performance in renewables and climate tech sectors.

In 2025, the Australian Securities & Investments Commission (ASIC) has rolled out stricter guidance on sustainability claims, making it harder for funds to exaggerate their green credentials. This means more transparency and better protection for investors seeking authentic impact.

2025 Policy Changes and Trends: What Investors Need to Know

This year, several policy changes are reshaping the green fund space:

• Mandatory Climate Disclosure: From July 2025, large funds and listed companies must disclose their climate risks and carbon footprints under new federal regulations. This improves the information available to green fund managers and investors.

• Green Tax Incentives: The federal government’s 2025 budget includes expanded tax incentives for green infrastructure and renewable energy investments—directly benefiting green funds with exposure to these sectors.

• Superannuation Shifts: Major super funds are ramping up their green allocations, spurred by APRA’s 2025 guidance on climate risk. Members can now select greener options within their super portfolios more easily than ever.

Real-world example: The Australian Ethical Emerging Companies Fund has increased its allocation to local clean tech startups, reporting a 17% year-on-year return in the first quarter of 2025. Similarly, Future Super has attracted thousands of new members since announcing its net-zero by 2030 target, with assets under management topping $10 billion.

How to Invest in Green Funds: Steps and Considerations

Getting started with green funds is easier than you might think, but due diligence is crucial. Here’s how to approach it:

• Clarify Your Goals: Are you seeking maximum environmental impact, financial returns, or a balance? Some green funds focus on specific sectors (like renewables), while others take a broader ESG approach.

• Check Certifications: Look for funds certified by reputable bodies such as RIAA or those listed on the ASX’s Sustainable Investment Products list.

• Review Fees and Performance: While green funds may have slightly higher management fees due to research and screening, many offer competitive returns. Compare performance over 3–5 years and scrutinise the underlying holdings.

• Access Points: You can invest via superannuation, managed funds, ETFs (like the BetaShares Australian Sustainability Leaders ETF), or through robo-advisors offering ESG portfolios.

Remember to read the Product Disclosure Statement (PDS) and ensure the fund’s values align with your own. The good news is that, with 2025’s regulatory crackdowns, the risk of greenwashing has significantly decreased.

Conclusion: The Future of Green Funds in Australia

Green funds are no longer a niche—they’re central to Australia’s investment future. With regulatory reforms, tax incentives, and growing transparency, 2025 is shaping up as a landmark year for sustainable investing. Whether you’re a seasoned investor or just starting out, green funds offer a unique way to align your portfolio with your values while pursuing strong, future-proof returns.