ASIC issues greenwashing guidelines

June 16, 2022

ASIC introduces guidelines to prevent greenwashing

The Australian Securities and Investments Commission (ASIC) has introduced a set of guidelines to prevent large funds from greenwashing.

In order to prevent greenwashing, ASIC’s guidelines ask that issuers of products, including superannuation fund trustees and responsible entities of managed funds, use clear labels in their disclosure and promotions.

Greenwashing has become a prevalent issue among financial institutions with misuse and untruthful information being presented to exaggerate the net zero value of products and targets.

Read more stories on Greenwashing from Minerva:

https://www.old.manifest.co.uk/sec-proposes-new-rules-against-greenwashing-in-esg-funds/

An example provided by the ASIC in showcasing a product that is not true to label is a sustainability-related product being labelled 'No Gambling Fund'. However, under its terms, the product may 'invest in companies that earn less than 30% of their total revenue from gambling activities'.

The guidelines also highlight the need to define the sustainability terminology they use and clearly explain how sustainability considerations are factored into investment strategies.

To gather the information to make an informed decision on the guidelines, ASIC had undertaken a ‘greenwashing’ review of a sample of superannuation and investment products.

ASIC has stated the publication could assist issuers to provide investors with the information they should have to make informed decisions.

Karen Chester, deputy chair of the ASIC, said: “Transparency and trust are paramount as the market for these products continues to develop and grow. In our region alone, sustainability-labelled investments have more than doubled between 2019 and 2021.

“Labels or headline statements about a product’s green credentials should not be misleading. Being ‘true to label’ is not a nice-to-have, it’s a regulatory must-have.”

Chester continued: “It’s 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.

“We have set out nine important questions for issuers to ask themselves. We would hope and indeed expect issuers to review their practices against our information sheet.”

Register to watch our Minerva Briefing on Sustainable Securities Lending: