ASIC homing in on super funds, listed companies amid greenwashing concerns

ASIC has confirmed that it is now investigating Australian organisations including super funds and listed companies in relation to allegations of greenwashing.

ASIC deputy chair Sarah Court told the House of Representatives Standing Committee on Economics this week that the regulator has stepped up its anti-greenwashing activities.

“The kinds of things that we’re looking at involve potential misleading or deceptive conduct by various listed entities, super fund trustees and one managed fund responsible entity,” Ms Court said. 

“So, looking at statements like claims about wanting to achieve net zero emissions by a particular time, claims about carbon neutrality, claims about an emissions-reduction strategy, and then the other broad area that we are looking at is claims about investment exclusions or screening processes applicable to sustainability-related financial products.”

Ms Court said that the industry had been put on notice regarding sustainability and climate-related claims after the regulator released a greenwashing information sheet earlier this year.

She said that organisations that make these types of claims needed to show evidence, while ensuring they have practices, systems and procedures in place to back them up.

“We see examples where a firm might say, ‘We're going to have net zero emissions by 2030 or 2050’, and so ASIC’s job there is to have a look at that and say, ‘That's very interesting. You show us how you’re going to achieve that. What are you actually doing on the ground today in 2022 that is likely to ensure that you will get there?’”

Also questioned by the committee, ASIC chairman Joe Longo said that greenwashing is “really a particular kind of harm” that the regulator feels strongly about.

“We’re looking for situations where consumers are misled by overstatement of green credentials or zero emissions with a view to misleading consumers or investors into doing something they would not otherwise do,” he said.

“That is not the hallmark of a well-informed market that’s going to encourage consumers to be acting in their own interest.”

Moreover, Mr Longo explained that the issue of greenwashing is not just limited to the investment space.

“The use of greenwashing representations is across the economy. It’s all goods and services,” he said.

“A consumer could be misled by an overstatement of where those eggs were hatched or where those goods and services came from, so to me that’s a legitimate area of concern for a financial services regulator.” 

On the issue of disclosure, Mr Longo said that ASIC is working with bodies both domestically and internationally to land on sustainable finance standards, and that this is one of its core strategic priorities.

“It’s really important that ASIC, that Australia, is aligned as much as it can be with what’s going on overseas from a capital raising perspective and an international investment perspective,” he said.

The ASIC chair drew attention to the regulator’s work with the International Sustainability Standards Board and the International Financial Reporting Standards.

“There’s a lot of work going on in those areas. Now at the moment, a lot of this is voluntary, but these standards I think are likely to, subject to government policy, become part of Australia’s requirements for reporting standards in the next two to three years,” said Mr Longo.

“This is all about a taxonomy of risks, being able to disclose these issues in a consistent way so investors can know what they’re dealing with when a company makes these disclosures.”

‘Biggest structural shift in global capital markets’

ASIC deputy chair, Karen Chester, described the move towards sustainable finance as being “the biggest structural shift in global capital markets”.

“When you look at the metrics, it’s quite extraordinary,” she told the committee this week.

“[Around] 80 per cent of global GDP is subject to a net zero target and we know from our own ASX 200 that 70 per cent of the entities [themselves are] subject to those targets as well.”

Earlier at the hearing, ACCC chair Gina Cass-Gottlieb highlighted a research from the International Consumer Protection and Enforcement Network which found that 40 per cent of environmental claims by companies are potentially misleading.

The competition regulator said that it believes that these misleading claims could provide firms with a competitive advantage and undermine the activities of those making genuine efforts to become more sustainable and transition to net zero.

“We see it not only as undermining community and consumer trust, but as undermining the capacity of Australian business to move as the policy commitments oblige towards the targets,” said Ms Cass-Gottlieb.

The ACCC confirmed that it has commenced its own investigation as well as internet sweeps to determine the extent of the issue in Australia.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.