Australian Securities and Investments Commission (ASIC) deputy chair Karen Chester has indicated the regulator is planning further action against greenwashing, on top of the dozens of regulatory interventions it has taken to date.
In an article penned for the Australian Institute of Company Directors’ latest Company Director magazine, Ms Chester said the issue of greenwashing erodes investor confidence in the market for sustainability-related financial products and corporate strategies.
These interventions included 23 corrective disclosure outcomes, 11 infringement notices issued, and in one case, the commencement of civil penalty proceedings.
“While these interventions are proportionate remedies, a more enduring antidote to greenwashing lies in comparable high-quality disclosure to meet investor information needs,” Ms Chester wrote.
“Global standards to this end will soon be within our reach. Sustainable finance (and by default combating greenwashing) is today a ‘whole of ASIC’ regulatory priority.
“We have been delivering on this priority through proactive surveillance and enforcement of governance and disclosure standards.”
Ms Chester said ASIC’s greenwashing report published in May provided transparency on why and how the regulator had intervened alongside the corrective outcomes of its actions.
“In doing so, we wanted to further inform market participants on how to avoid greenwashing practices when preparing disclosures and making representations,” she said.
In its greenwashing report, ASIC noted that it had intervened in situations where:
- Net zero statements and targets did not appear to have a reasonable basis or were factually incorrect.
- Terms like “carbon neutral”, “clean” or “green” didn’t appear to have a reasonable basis for the related claims.
- The use of inaccurate labelling or vague terminology in sustainability-related funds.
- The scope or application of a sustainability-related investment screen or exclusion being vague or overstated in a PDS or on associated websites for ESG-related financial products.
‘Antidote’ to greenwashing
According to Ms Chester, a “more effective, enduring antidote” to the issue of greenwashing in Australia is “transparency through meaningful disclosure”.
The ASIC deputy chair said this would ultimately be defined by a mandatory climate change-related disclosure regime that is based on the global baseline currently being developed by the International Sustainability Standards Board (ISSB).
“ASIC supports the government’s climate reporting and broader sustainable finance strategy (including anti-greenwashing initiatives and disclosure supportive policies like ESG labelling) through our role on the Council of Financial Regulators Climate Working Group,” Ms Chester said.
“These policy initiatives will provide the ‘bright lines’ to afford greater comparability in climate-related disclosures and, over time, sustainability issues.”
The regulator encouraged companies to participate in Treasury’s current and planned consultation on the proposed climate disclosure standards and sustainable finance strategy.
“To ensure your company is well placed to transition to future climate-related disclosure standards, you should be considering the potential implications of the new ISSB standards for your future disclosure requirements, especially for listed entities, large financial institutions, and super funds,” Ms Chester added.
“An immediate imperative is for companies to be moving now to embed the right processes, practices, and governance ahead of the future reporting requirements under ISSB.”
Additionally, Ms Chester encouraged product issuers, advisers, and company directors to consider the regulator’s information sheet on how to avoid greenwashing published in June last year.
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.