Watchdog’s Guide to Countering Investment Greenwashing

Live

Experts have welcomed new guidelines from the corporate watchdog which should prevent Australians from getting stuck with investments based on fake green credentials.

The “guide on how to avoid greenwashing” for pension funds and managed funds released on Tuesday follows last year’s warning to funds against overstating claims of green, sustainable or ethical investing.

The Australian Securities and Investments Commission’s Fact Sheet tells investment managers and issuers what information they must disclose and how to avoid misleading claims.

Commissioner Sean Hughes warned funds that tackling greenwashing would remain a priority and urged the industry and investors to refrain from misrepresentation about financial products.

“In evaluating investment options that align with their values, we encourage consumers to look for vague or ambiguous language or exaggerated marketing claims that have no reasonable basis to support them,” he said.

“This is clearly an evolving area, which is attracting the attention of investors, funds and policy makers.”

Consumers demand more transparency

The guidance echoes steps taken by regulators in the US, UK and Europe to compel the financial industry to better inform the public and governments, and to help capital flows into truly sustainable investments.

The Responsible Investment Association Australasia said the guidance would help investment managers improve the overall quality of sustainable finance products in Australia.

“Greenwashing poses a real threat to the future of sustainable finance,” said association president Simon O’Connor.

But consumers are aware of the threat and are demanding more transparency from their fund or bank.

Nearly three-quarters (72%) of Australians are concerned about greenwashing and would consider switching if they found out their current fund was investing in companies engaged in activities inconsistent with their values, according to the 2022 survey. association.

Mr O’Connor said the new ASIC guidelines are “essential reading” for understanding how greenwashing is defined, what regulations must be followed and issues to consider when marketing sustainable products.

“Combating greenwashing is just as important for investors as improving corporate sustainability reporting,” he said.

The association is calling on the new federal government to push for strong sustainable investing standards and a single “taxonomy” or classification system.

The industry’s Australian Sustainable Finance Institute is developing a taxonomy for Australia, aligned with international efforts in other advanced economies.

-PAA