ASIC greenwashing antidote

ASIC Deputy Chair Karen Chester highlights in an article that combating greenwashing practices requires meaningful, responsible, and transparent disclosure. Indeed, greenwashing undermines investor confidence in sustainability-related financial products and corporate strategies. To address this issue, ASIC has taken 35 regulatory interventions against greenwashing activities from June 2022 to March 2023. However, a more enduring antidote lies in comparable high-quality disclosure that meets investor information needs, which global standards are expected to achieve soon.
Sustainable finance, and consequently addressing greenwashing, is a top regulatory priority for ASIC. It has been actively enforcing governance and disclosure standards through proactive surveillance. In response to the greenwashing challenge, ASIC released Information Sheet 271 in June 2022, urging superannuation and investment funds, as well as directors, to evaluate their practices against nine questions designed to prevent misleading and deceptive greenwashing practices. This move signalled ASIC’s intention to use a disrupt-and-enforce approach.
Recently, ASIC published a report detailing their interventions against greenwashing from May to March 2023. The ASIC interventions ranged from securing timely corrections to initiating civil penalty proceedings. The report aimed to provide transparency on the reasons for intervention and the outcomes achieved, helping market participants understand how to avoid greenwashing practices in their disclosures and representations.
The interventions primarily targeted instances where net zero statements and targets lacked a reasonable basis or were factually incorrect, and where terms like „carbon neutral“, „clean“, or „green“ were used without sufficient justification. Inaccurate labelling or vague terminology in sustainability-related funds and unclear or exaggerated sustainability-related investment screens or exclusions also triggered ASIC’s interventions.
ASIC believes that the long-term solution to greenwashing lies in meaningful disclosure. This involves complying with existing laws, but ASIC advocates for a mandatory climate change-related disclosure regime in Australia based on the global standards developed by the ISSB. ASIC supports the government’s climate reporting and sustainable finance strategy, actively participating in the Council of Financial Regulators Climate Working Group.
ASIC encourages market participants to engage in Treasury’s consultations on climate disclosure standards and sustainable finance strategy, contributing to the establishment of suitable standards for the Australian market. Companies, particularly listed entities, large financial institutions, and super funds, are advised to prepare for future reporting requirements under ISSB by embedding appropriate processes, practices, and governance now.