Australia’s Investor Watchdog Gets Tough on ‘Greenwashing’

By Nick Hedley

The Australian Securities & Investments Commission (ASIC) says the country’s superannuation funds need to be better at avoiding ‘greenwashing’ – or misrepresenting the extent to which their products and strategies are environmentally friendly or ethical.

Environmental, Social and Governance (ESG) assets are projected to exceed US$53 trillion by 2025 and represent more than a third of total assets under management, according to ASIC. With this in mind, the regulator and its peers in the U.S. and other markets are working to ensure greater transparency.

ASIC has published a set of guidelines for superannuation funds after a review of the industry found “some areas for improvement.”

The regulator said in a statement that when promoting solutions, funds need to use clear labels, define the sustainability terminology they use, and clearly explain how sustainability considerations are factored into their investment strategies.

ASIC Deputy Chair Karen Chester said: “Managed funds and super funds are responding to the increasing investor demand for sustainability-focused investments. Investors are not only motivated by their values here, but also by long-term financial returns.”

“Labels or headline statements about a product’s green credentials should not be misleading. Being ‘true to label’ is not a nice-to-have, it’s a regulatory must-have,” Chester said. “It’s also a must-have for investor confidence and trust. And a must-have for both fair and efficient market outcomes here. Misdirected investment here will inevitably be at great economic cost.”

ASIC Commissioner Sean Hughes said greenwashing “will remain a priority area of focus” and the regulator will continue to monitor for misleading claims.

In May, the U.S. Securities & Exchange Commission (SEC) proposed new rules aimed at stamping out the practice.

SEC Commissioner Allison Herren Lee said at the time that due to “explosive demand” for sustainable investment solutions, there is an increasing need for consistent, comparable and reliable information to help investors make informed decisions.

The regulator’s proposals focused largely on three areas: Categorizing the various types of funds engaged in sustainable investing; whether authorities have calibrated disclosures sensibly for each category; and when and how to require disclosures of greenhouse gas (GHG) emissions.