Australia: New Greenwashing Guidance
By Jim Bulling and Alex Morrison
ASIC has released Information Sheet 271 (INFO 271) to assist responsible entities of managed funds, corporate directors of CCIVs and trustees of registerable superannuation funds (Product Issuers) in avoiding ‘greenwashing’ when offering sustainability-related products (Products). INFO 271 describes greenwashing and provides a comprehensive overview of the current regulatory setting for communications about sustainability–related products.
Greenwashing is “the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.” In their review of a sample of superannuation and investment products, ASIC identified a number of opportunities for improvement. Key areas for development included clear labelling, inclusion of definitions for sustainability terminology and explanations of the ways sustainability considerations impact on a chosen investment strategy.
Additionally, ASIC has included 9 key questions for issuers to consider in relation to their Products. These questions prompt issuers to review labels, key terminology and headline claims to ensure that they are not misleading. The guiding questions also encourage issuers to consider the explanations that accompany their Products, whether reasonable grounds exist for stated sustainability targets and the accessibility of relevant information for investors.
In the context of ESG, misleading and deceptive conduct issues are particularly important in relation to representations made about future matters that are unsupported with reasonable grounds. Whether a particular statement or conduct is misleading or deceptive will depend on all of the circumstances of the particular case, and the overall impression created for an investor.
Affected Product Issuers should be aware of, and review their current practices against INFO 271. Greenwashing is and will remain a priority area of focus for ASIC, where attention will be directed to identifying misleading claims about ESG and sustainability.