The Australia Securities and Investment Commission (ASIC) has published a report on its regulatory interventions made between 1 July 2022 and 31 March 2023 in relation to greenwashing concerns (which can be accessed here). The report covers ASIC’s issuance of greenwashing infringement notices during the period and its observed increase in representations made by listed companies, managed funds and superannuation funds on environmental, social and governance credentials.
In its report, ASIC provided a number of examples of how responsible entities of managed funds and superannuation trustees responded to particular issues ASIC had identified.
|Subject||Issues identified by ASIC||Corrective measures taken|
|Fund labels||Names of financial products including sustainability-related terms were inconsistent with the investments or the investment process described for the product.||The name of a managed fund was changed to avoid suggestion that it was transitioning away from carbon, which ASIC considered was not consistent with some of the fund’s investments.|
|Scope or application of investment exclusions and screens||The scope or application of investment screens in website or PDS disclosure being vague or overstated. Investment screens being more specific, and being implemented on a more limited basis, than stated in the disclosure.||Updated disclosure to clarify the investment selection process and enable investors to clearly understand excluded investments against materiality thresholds.|
Updated disclosure to explain how ESG considerations are taken into account in the investment research process where such considerations would have ‘a material financial impact’.
Updated disclosure to remove wording that included overstated representations on investment screens claiming to prevent investment in companies engaging in ‘polluting and carbon intensive activities’, ‘financing or support of activities which cause environmental or social harm’, and ‘poor corporate governance’.
Updated disclosure to elaborate on exclusions and how claimed ‘reputational risk of controversial factors’ were taken into account in the investment process.
|Use of vague terms||Use of vague and insufficiently explained terms in describing investment approaches||More detailed explanations of terms such as ‘influence change’, ‘poor sustainability characteristics’, ‘social diversity’, ‘robust sustainable practices’ and ‘protection of the planet’.|
ASIC is clearly still very active in its surveillance of ‘greenwashing’ practices and we expect this to continue. This report is a timely reminder for responsible entities and superannuation trustees to make sure all disclosures and marketing materials accurately describe (and do not overstate) investment exclusions and screens. Clear and detailed explanations should also be provided for these processes, as well as for any vague or uncertain terms used in the disclosure.