Experts have welcomed new guidelines from the corporate watchdog that should stop Australians from getting stuck with investments based on fake green credentials.
The “how to avoid greenwashing guide” for superannuation and managed funds issued on Tuesday follows last year’s warning to funds against overplaying environmentally friendly, sustainable or ethical investment claims.
The Australian Securities and Investments Commission’s information sheet tells investment managers and issuers what disclosures they should be making and how to avoid misleading claims.
Commissioner Sean Hughes warned funds that countering greenwashing would remain a priority, and urged the industry and investors to dob in any false claims about financial products.
“In weighing up investment options that suit their values, we encourage consumers to look out for vague or ambiguous language or exaggerated marketing claims that lack a reasonable basis to support them,” he said.
“This is clearly an evolving area, which is attracting attention from investors, funds and policy-makers alike.”
Consumers demand more transparency
The advice echoes moves by regulators in the United States, United Kingdom, and Europe to compel the financial sector to better inform the public and governments, and help capital flow to genuinely sustainable investments.
The Responsible Investment Association Australasia said the guidance would help investment managers to raise the overall quality of sustainable finance products in Australia.
“Greenwashing poses a real threat to the future of sustainable finance,” association head Simon O’Connor said.
But consumers are attuned to the threat and they are demanding more transparency from their fund or bank.
Almost three quarters (72 per cent) of Australians are concerned about greenwashing, and would consider switching if they found out their current fund was investing in companies engaged in activities inconsistent with their values, according to the association’s 2022 survey.
Mr O’Connor said the new ASIC guidance is “essential reading” to understand how greenwashing is defined, what regulations must be followed, and the questions to consider when marketing sustainability products.
“Equally important for investors to tackle greenwashing is improved company sustainability reporting,” he said.
The association is calling for the new federal government to push for robust sustainable investment standards, and a single “taxonomy” or classification system.
The industry’s Australian Sustainable Finance Institute is developing a taxonomy for Australia, aligned with international efforts in other advanced economies.