While major super funds have individually said they are taking steps to improve their sustainable finance disclosures, at a recent roundtable hosted by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC), fund executives highlighted a number of difficulties that could put them at risk of greenwashing.
According to notes from the fifth Superannuation CEO Roundtable, common challenges for funds include “obtaining the right expertise internally and externally, the lack of standardised taxonomy, ensuring investment screens operate effectively, oversight of third-party providers, and ensuring accurate wording in all marketing materials”.
ASIC originally released an information sheet on how to avoid greenwashing when offering or promoting sustainability-related products in June last year.
Since then, the regulator has commenced civil penalty proceedings against Active Super and Mercer Super, as well as Vanguard, over greenwashing allegations.
“Recent guidance issued by ASIC and subsequent disclosure-related enforcement actions have highlighted the need for product issuers, such as superannuation funds, to ensure that their sustainable finance disclosures are true and accurate,” the roundtable notes read.
“APRA and ASIC emphasised that the introduction of mandatory climate-related financial disclosure requirements in Australia aim to enhance transparency and boost informed decision making by investors.”
A second round of consultation on climate-related financial disclosures was opened in June, following initial consultation that ran between December 2022 and February 2023.
At the roundtable, APRA and ASIC together stressed the importance of preparing for the new disclosure regime.
“This involves implementing systems and processes, establishing governance practices that meet any new climate reporting requirements applying to superannuation funds, and adopting measures to prevent misleading disclosures,” they said.
The executives in attendance, including from UniSuper, Australian Ethical, Spirit Super, Diversa Trustees, and BT, were in agreement that maintaining a static stance on disclosure and transparency requirements is “no longer viable”.
“Additionally, the CEOs acknowledged that the management of sustainable finance issues has evolved, involving not only the investment team but increasingly also other internal teams like legal, marketing, risk, and compliance. A takeaway was the need to embed engagement with these issues across the fund,” the notes read.
Steps taken to improve sustainable finance disclosures include working with independent experts, organising internal workshops to promote awareness about greenwashing risks, and using due diligence board sub-committees to properly scrutinise disclosures made.
