ASIC warns super funds to remain true to label when issuing sustainable investment products.
The Australian Securities & Investments Commission (ASIC) has issued new guidelines on greenwashing, warning superannuation funds to remain true to label.
The regulator undertook a review of superannuation and investment products and found that issuers of products, including superannuation fund trustees and responsible entities of managed funds, need to use clear labels in their disclosure and promotions.
They also need to define the sustainability terminology they use and clearly explain how sustainability considerations are factored into their investment strategy.
“Labels or headline statements about a product’s green credentials should not be misleading,” Karen Chester, Deputy Chair at ASIC, said. “Being ‘true to label’ is not a nice-to-have, it is a regulatory must-have.
“It is also a must-have for investor confidence and trust. And a must-have for both fair and efficient market outcomes here. Misdirected investment here will inevitably be at great economic cost,” Chester said.
ASIC considers ‘greenwashing’ as the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.
The regulator gave an example of a product that was labelled as ‘tobacco-free’, but where the investor applied a revenue threshold to the activities relating to the production and sale of tobacco.
While the statement ‘tobacco free’ implied an absolute exclusion, using revenues thresholds means these products could still contain tobacco activities.
ASIC’s release of the new guidelines on greenwashing comes just two weeks after the German police raided the Frankfurt office of asset manager DWS over greenwashing allegations and saw the departure of the firm’s Chief Executive Officer a day later.
Some commentators expect regulators to become more strict on sustainable investment products as recent years have seen a boom in the number of investment strategies that claim ESG credentials.
ASIC said that sustainability-labelled investments in the region have more than doubled between 2019 and 2021. While globally, ESG assets are projected to exceed US $53 trillion by 2025 and represent more than a third of total assets under management.
“We have set out 9 important questions for issuers to ask themselves. We would hope and indeed expect issuers to review their practices against our information sheet,” Chester said.