ASIC warns of more greenwashing action

Deputy chairman Karen Chester has detailed 35 actions against greenwashing in recent months, as she flagged more to come.

Deputy chairman Karen Chester has detailed 35 actions against greenwashing in recent months, as she flagged more to come. Picture: Britta Campion / The Australian

The Australian Securities and Investments Commission (ASIC) is set to hit more companies and funds involved in greenwashing, deputy chairman Karen Chester, has warned at a conference on Wednesday.

Ms Chester was speaking on the release of a report by ASIC detailing 35 actions it has against greenwashing since July 2022.

“Greenwashing distorts the information that a current or prospective investor might need (and) corrodes investor confidence in the market for sustainability related financial products and corporate strategies,” she said at a speech to a conference hosted by Responsible Investment Association Australasia (RIAA).

“We continue to progress ongoing investigations and open new surveillances.”

“We have several investigations underway and anticipate further regulatory action.”

Ms Chester said ASIC was expanding its surveillance from an initial focus on managed funds and the corporate sector to include the superannuation sector and the wholesale green bond market.

She said the 35 actions taken by ASIC since last July included 23 instances where a company or fund had agreed to amend their public statements, 11 infringement notices and one civil penalty action.

These included comments about net zero commitments and targets, the use of the terms “carbon neutral,” “clean” or “green”, labelling around the sustainability of products and funds, and comments by the company or fund on the exclusions or screens in their investment policies.

She said ASIC was also looking at the social media comments made by companies and funds.

ASIC’s latest action was taken last week against Future Super for a post on its Facebook page which talked about investors moving nearly $400m out of fossil fuels.

Given that Future Super itself had $400m in assets, ASIC said this could be implied that it had had its assets originally invested in fossil fuel companies but had since sold out of them.

Announcing the action, ASIC said the social media post by Future Super had “overstated the positive environmental impact of the fund” in a way which could be misleading for investors and potential investors.

Ms Chester told the RIAA conference that the infringement notice issued to Future Super highlighted the fact that “statements on social media promoting green claims are not immune to ASIC action.”

Her comments come as the federal government has announced it will give the corporate regulator another $4.3m to crack down on greenwashing.

She said there was now an “ever growing playing field for greenwashing” as both companies, managed funds and super funds were keen to talk about their commitments to move to net zero and promote their green credentials.

She said consulting firm McKinsey had recently estimated that it would take some $US9.2 trillion of investments annually for the infrastructure needed to get to net zero, a figure which would require a “step change in capital reallocation.”

In Australia, she said, the number of assets managed using a “responsible” investment approach had now topped more than $1.54 trillion, making up some 43 per cent of the total market for managed funds.

“Supply is clearly moving to meet demand,” she said.

ASIC research had also shown that more than 400 ASX listed companies had used the terms “carbon neutral” or “net zero” in their price sensitive announcements in 2022 – compared to only less than 50 in 2019.

She said the transition to a lower carbon world and the Federal Government’s policies around the energy transition, including legislating its net zero targets, would see increasing moves by companies and funds in Australia talking about their environmental commitments.

This has come at the same time as significant moves in the US and Europe to encourage the energy transition including President Biden’s Inflation Reduction Act and the European Union’s Green Industrial Plan.

There were also global moves to set standards for companies and funds on energy and nature related financial disclosures.

She said greenwashing had been identified as an area of concern by many securities regulators around the world.

The Australian Competition and Consumer Commission (ACCC) and the Clean Energy Regulator were also focussing on this area.

ASIC was also working with the Council of Financial Regulators on the issue through its climate working group.

Ms Chester said ASIC’s focus on greenwashing in climate related financial disclosures had been ongoing since 2018.

She said there had been a significant step up globally since then around disclosure standards in this area including the establishment of the International Sustainability Standards Board (ISSB) which she described as a “beyond significant” development.

She said the ISSB was planning to issue new standards on sustainability and climate related financial information by the end of June.

At the same time, the federal government has also been working on moves to introduce a proposed mandatory climate change related regime for large businesses and financial institutions, including super funds.

“ASIC supports both the shift to mandatory disclosure in Australia and the work of the ISSB in developing the global baseline to do so,” she said.

She said Australia needed to have a tough approach to cracking down on greenwashing if it was to “remain a destination for global capital.”

Ms Chester said ASIC’s focus on greenwashing had included looking at product disclosure statements, advertisements and other market disclosures by managed funds, superannuation funds and listed companies.

She said the ASIC report on its actions taken since July last year was aimed at providing more guidance on its policies and the rules around avoiding greenwashing.

She said case-by-case intervention against greenwashing was not a “cost effective nor comprehensive antidote to greenwashing.

This was why ASIC was supporting policy moves by the federal government to deliver more transparency and trust around climate related reporting.