Push for advisers to be trained in how to recognise greenwashing

After ASIC released an information sheet to help issuers avoid greenwashing when offering or promoting sustainability-related products last week, Ethical Invest Group has called for “relevant and accurate training” for advisers as the risk of providing advice that inadvertently supports companies or investment funds complicit in greenwashing falls “unfortunately and unfairly” on professional planners.

“To ensure your client is not exposed to a harmful industry, one they’ve specifically asked to avoid, your due diligence is required. And your skills and knowledge to avoid greenwashing will come into play,” Ethical Invest Group founder Alexandra Brown said.

“Greenwashing can occur all along the investment process. From how a company discloses their sustainability efforts, and what level of corporate governance they have in place, to how this information is used by ratings providers and investment managers.

“Does a company understand what ESG metrics to disclose, and how to measure them? With limited rules in place for disclosure, comparing companies is difficult, and greenwashing can occur either deliberately or unintentionally.”

Ms Brown encouraged advisers to consider the group’s Ethical Advice Accelerator online program which is designed to provide knowledge, skills and resources for Australian advisers looking to provide ethical and responsible investment advice.

The program also tackles how to recognise greenwashing and how to ensure that the companies and investment funds that advisers are recommending to their clients do not breach the requirements in place for reporting on sustainability performance.

In its recent 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.

Greenwashing was also recently identified as one of the biggest hurdles for financial advisers looking to incorporate responsible investment (RI) into their practices.

Meanwhile in March, the Responsible Investment Association Australasia (RIAA) released the results of a study which found that knowing about responsible investment is now the top expectation of financial advisers.

Over 1,000 Australians surveyed this year expect their advisers to be knowledgeable about responsible investment, which increased from 54 per cent in 2020 to 64 per cent in 2022.

Around 74 per cent of Australians are considering moving to another provider if they found out their current fund was investing in companies inconsistent with their values.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.