Australian Securities Regulator Warns it’s on the Lookout for Greenwashing
Australia’s corporate, markets, and financial services regulator ASIC is on the lookout for greenwashing, warning providers of investment funds and financial products that it will watch out for misleading sustainability claims, and providing guidance for fund managers and issuers to keep clear of greenwashing.
In a recent speech by ASIC Chair Joseph Longo, published on the regulator’s website on Friday, Longo said that as ESG and sustainable investment products are growing in prominence, and issuers are increasingly making representation about their ESG credentials, the organization is focused on “preventing harms from ‘greenwashing’, or misleading claims about the extent to which products are environmentally friendly, sustainable, or ethical.”
Longo said:
“We will be looking for funds and products that make misleading claims related to sustainability. Where we find wrongdoing, we will not hesitate to use our range of regulatory tools, including enforcement action.”
ASIC’s announcements come as regulators around the world, are ramping efforts to fight greenwashing, Last month, the SEC announced that it had charged BNY Mellon Investment Adviser for making misstatements and omissions about the ESG considerations used for investment decisions in some of its mutual funds. The reports of the probe also follow the resignation of Deutsche Bank’s investment arm DWS’ CEO Asoka Woehrmann, a day after police raided the firms’ Frankfurt offices as part of an investigation into greenwashing allegations at the firm. Last week, Goldman Sachs confirmed media reports of an SEC investigation into certain of its ESG-themed funds.
The regulator has posted an information sheet on its website aimed at helping fund managers and issuers to avoid greenwashing when promoting or offering sustainability-related products. The publication includes guidance encompassing disclosure obligations, providing clear explanations of how sustainability-related factors are incorporated in investment strategies, avoiding vague, unsubstantiated or misleading terminology and claims, and the use of metrics and targets. ASIC also outlines practices for the use of sustainability-related terminology in product label and names. Click here to access the ASIC information sheet.
In his speech, Longo also suggested that companies be prepared to meet mandatory climate disclosure requirements. While regulators and lawmakers in several jurisdictions, including the US’ SEC, EU’s EFRAG and the UK have introduced or proposed mandatory climate-related corporate disclosure, Australia to date has only guided issuers to provide voluntary reporting on climate issues.
Noting the actions of the other regulators, Longo encouraged issuers to provide TCFD-aligned climate disclosures, saying that, “this will place companies in a good stead to comply with any standards that are mandated in future.”
Longo added:
“Climate change is a systemic risk. Investors need listed companies to disclose meaningful and useful information, so that the physical and transitional risks of climate change can be priced and capital allocated efficiently.
“We want to see continued improvement in climate change governance and disclosure practices; and in particular, that climate-related disclosures by listed companies comply with the law and are decision-useful for investors.”