The Australian Securities and Investments Commission (ASIC) has begun taking action against organisations which misrepresent the extent to which financial products or investment strategies are environmentally friendly, sustainable or ethical.
In a speech at the Carbon Market Institute’s Australasian Emissions Reduction Summit this week, ASIC deputy chair Karen Chester said that the act of greenwashing was distorting the information that investors may be using to make informed investment decisions.
“It erodes investor confidence in the market for sustainability-related financial products and corporate strategies. It corrodes fair and efficient markets,” she said.
As revealed to the House of Representatives standing committee on economics earlier this month, ASIC is conducting a number of investigations in relation to allegations of greenwashing.
“The kinds of things that we’re looking at involve potential misleading or deceptive conduct by various listed entities, super fund trustees and managed fund responsible entities,” Ms Chester explained.
“They relate to things like net zero target statements and investment exclusions and screening for sustainability-related financial products.”
According to Ms Chester, the economic costs of greenwashing “cannot be overstated”.
“Companies or funds engaging in greenwashing attract capital at the expense of others that are more worthy — creating costly inefficiencies,” she said.
“But there is also the indirect and compounding cost — the loss of investor confidence. Confidence in sustainable investment products. Confidence in target statements. This is why we need to strongly deter greenwashing misconduct.”
On Thursday, ASIC confirmed that it had taken its first action against greenwashing.
ASX-listed energy company Tlou Energy was ordered to pay a total of $53,280 to comply with four infringement notices issued by the regulator over concerns about alleged false or misleading sustainability-related statements made to the ASX in October last year.
“As entities promote sustainability and green practices as part of their value proposition, they must ensure they can support those statements and have a reasonable basis for doing so,” said ASIC deputy chair Sarah Court.
“Companies are on notice that ASIC is actively monitoring the market for potential greenwashing and will take enforcement action, including court action, for serious breaches,” said Ms Court.
ASIC noted that the payment of an infringement notice is not an admission of guilt or liability.
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.