ASIC issues 'greenwashing' information sheet

The corporate regulator has issued a new information sheet to help issuers avoid greenwashing when offering or promoting sustainability-related products.

ASIC defines greenwashing as the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.

In drafting its latest information sheet, ASIC undertook a review of a sample of superannuation and investment products and identified key areas for improvement, including the need for issuers to use clearer labels in their disclosure and promotions, coupled with a clearer explanation of how sustainability considerations are factored into their investment strategy.

“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 return,” said ASIC deputy chair Karen Chester.

“Transparency and trust are paramount as the market for these products continues to develop and grow.

"In our region alone, sustainability-labelled investments have more than doubled between 2019 and 2021. While globally, ESG assets are projected to exceed US$53 trillion by 2025 and represent more than a third of total assets under management,” Ms Chester continued.

She clarified that ASIC’s information sheet is “simply about helping issuers comply with their existing regulatory obligations”.

“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. 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.

“We have set out nine important questions for issuers to ask themselves. We would hope and indeed expect issuers to review their practices against our information sheet,” Ms Chester said.

ASIC is expected to continue to closely monitor the market in search of misleading claims about ESG and sustainability.

“We are also appealing to industry and investors to alert us if you see suspected greenwashing in financial products,” ASIC commissioner Sean Hughes said.

ASIC has also published new information to help investors assess if their values and goals align with a sustainability-related or ESG product.

“In weighing up investment options that suit their values, we encourage consumers to look out for vague or ambiguous language or exaggerated marketing claims that lack a reasonable basis to support them,” said Mr Hughes.

“This is clearly an evolving area, which is attracting attention from investors, funds and policymakers alike. ASIC will continue to monitor sustainability disclosure practices and will make changes to INFO 271 to ensure our information remains relevant, contemporaneous and useful.”

The greenwashing information sheet is available here.

RIAA applauds ASIC's efforts

The Responsible Investment Association Australasia (RIAA) welcomed ASIC's guidance in a statement on Tuesday, noting it will help investment managers raise the overall quality of sustainable finance products.

“Greenwashing poses a real threat to the future of sustainable finance. Our 2021 research shows that while the majority (89 per cent) of the Australian investment market claims to be responsible, it is just 40 per cent of managers that are engaged in leading practice responsible investing” said RIAA CEO Simon O’Connor.

“We welcome the focus on greenwashing by ASIC which reinforces that, by law, any investor making a sustainability claim must be able to substantiate this and provide supporting evidence.

"This guidance will be essential reading for investors and product issuers to understand how greenwashing is defined, the existing regulations they need to comply with and the questions to consider when marketing sustainability related products, such as if the product is true to label."

RIAA’s 2022 consumer study found 72 per cent of Australians are concerned about greenwashing, with three-quarters of Australians considering moving to another provider if they found out their current fund was investing in companies engaged in activities inconsistent with their values.