Ultimately, only meaningful, responsible and transparent disclosure will effectively combat greenwashing practices, writes ASIC deputy chair Karen Chester.
Greenwashing erodes investor confidence in the market for sustainability-related financial products and corporate strategies.
The Australian Securities and Investments Commission has taken 35 regulatory interventions against greenwashing activity in the nine months to March 2023.
While these interventions are proportionate remedies, a more enduring antidote to greenwashing lies in comparable high-quality disclosure to meet investor information needs.
Global standards to this end will soon be within our reach.
Sustainable finance (and by default combating greenwashing) is today a ‘whole of ASIC’ regulatory priority.
We have been delivering on this priority through proactive surveillance and enforcement of governance and disclosure standards.
A year ago, I penned a Company Director article following the release of ASIC Information Sheet 271 How to avoid greenwashing when offering or promoting sustainability-related products.
We called upon superannuation and investment funds, plus directors more broadly, to review practices against the nine questions set out in the information sheet.
Those nine questions, informed by ASIC’s surveillance of current practices, were framed to avoid misleading and deceptive greenwashing practices.
We also flagged that we were moving to a disrupt-and-enforce stance.
One year on, we published a short report in May on ASIC’s recent greenwashing interventions, detailing the 35 interventions we have taken against greenwashing over the nine months to March 2023.
Our interventions ranged from securing timely corrections and issuing public infringement notices through to commencing civil penalty proceedings.
Importantly, the report provides transparency on why and how we have intervened, alongside the corrective outcomes of our actions. In doing so, we wanted to further inform market participants on how to avoid greenwashing practices when preparing disclosures and making representations.
Why ASIC intervened
As highlighted in the report, ASIC intervened where:
Net zero statements and targets did not appear to have a reasonable basis, or were factually incorrect
Terms like ‘carbon neutral’, ‘clean’ or ‘green’ didn’t appear to have a reasonable basis for the related claims
The use of inaccurate labelling or vague terminology in sustainability-related funds
The scope or application of a sustainability-related investment screen or exclusion being vague or overstated in a PDS or on associated websites for ESG-related financial products.
We will continue our targeted surveillance activity, progress ongoing investigations and anticipate further enforcement action.
Greenwashing’s enduring antidote
ASIC believes a more effective, enduring antidote to greenwashing is transparency through meaningful disclosure.
Initially, this means disclosures that comply with today’s law.
Ultimately, it means a mandatory climate change-related disclosure regime in Australia that is based on the global baseline being developed by the International Sustainability Standards Board (ISSB).
ASIC supports the government’s climate reporting and broader sustainable finance strategy (including anti-greenwashing initiatives and disclosure supportive policies like ESG labelling) through our role on the Council of Financial Regulators Climate Working Group.
These policy initiatives will provide the ‘bright lines’ to afford greater comparability in climate-related disclosures and, over time, sustainability issues.
We encourage your participation in Treasury’s current and planned consultation on both the government’s proposed climate disclosure standards and sustainable finance strategy.
Your feedback will help the government to establish standards and strategy for the Australian market.
To ensure your company is well placed to transition to future climate-related disclosure standards, you should be considering the potential implications of the new ISSB standards for your future disclosure requirements, especially for listed entities, large financial institutions and super funds.
An immediate imperative is for companies to be moving now to embed the right processes, practices and governance ahead of the future reporting requirements under ISSB.
We encourage product issuers, advisers and directors to consider our How to avoid greenwashing information sheet and report on recent greenwashing interventions.