Being ‘true to label’ is a regulatory must-have for sustainability-related products, says ASIC deputy chair.
The Australian Securities and Investments Commission (ASIC) has issued new guidance to help funds avoid ‘greenwashing’ and enhance disclosures when offering or promoting sustainability-related products.
The guidance covers responsible entities of managed funds, directors of corporate collective investment vehicles, and trustees of registrable superannuation entities.
ASIC said it undertook a ‘greenwashing’ review of a sample of superannuation and investment products and identified some areas for improvement, particularly in areas such as disclosures and promotions.
In a new information sheet, ASIC highlights that issuers of sustainability-related products should be using clear labels, defining the sustainability terminology they use, and clearly explaining how sustainability considerations are factored into their investment strategy.
The guidance emphasises the need to comply with existing requirements when promoting or offering sustainability-related products – including the prohibitions against misleading and deceptive statements and conduct, as well as disclosure obligations.
Issuers are further asked to keep up to date with international regulatory developments and consider how they can improve disclosures in light of these developments, including work underway by the ISSB (International Sustainability Standards Board) to develop standards on climate-related and sustainability-related disclosures.
“Transparency and trust are paramount as the market for these products continues to develop and grow,” said ASIC deputy chair Karen Chester. “In our region alone, sustainability-labelled investments have more than doubled between 2019 and 2021.”
In light of the growth of sustainability-labelled investment products, the information sheet is intended to help product issuers comply with existing regulatory obligations and ensure that product labels and headline statements about green credentials are not misleading, ASIC says.
“Being ‘true to label’ is not a nice-to-have, it’s a regulatory must-have,” Chester said. “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.”
The information sheet sets out nine questions for issuers to ask themselves to avoid misleading or deceptive greenwashing practices when preparing communications and disclosures about sustainability-related products.
Product issuers are expected to review their practices against the information sheet, published here.
Greenwashing will continue to be a priority area of focus for ASIC. The regulator said it is continuing to monitor the market and will be looking for misleading claims about ESG and sustainability. Industry participants and investors are asked to alert ASIC if they see suspected greenwashing in financial products.
ASIC has also published new information to help investors assess if their values and goals align with a sustainability-related or ESG product. Investors are asked to be on the lookout for “vague or ambiguous language or exaggerated marketing claims that lack a reasonable basis to support them”.