Greater clarity on green investing a matter of urgency, warns BetaShares’ Greg Liddell

Initiatives to stamp out greenwashing and set clear sustainable-finance definitions are overdue and require greater urgency, warns BetaShares director Greg Liddell.

Government and industry initiatives to stamp out greenwashing and set clear sustainable-finance definitions are overdue and require greater urgency, given the nation confronts a “rapidly destabilising” climate, warns BetaShares’ Greg Liddell.

Mr Liddell, a responsible investments director at BetaShares, said Australia needed to move forward at pace on measures to give investors greater clarity on green investing and finance.

“Investors from all walks of life are often attempting to direct capital to sustainable activities, without any real clarity about what counts as a green investment. In particular, a clear sustainable finance taxonomy will greatly assist efforts to address greenwashing by giving everyone clarity about the goalposts,” he added.

Treasurer Jim Chalmers announced a string of measures on Friday – after an investor and industry roundtable in Brisbane – including the introduction of sovereign green bonds, consistent clean energy standards and home ratings, and measures to clamp down on false claims.

The government said it would co-fund the initial development phase of an Australian sustainable finance taxonomy, or set of definitions, in partnership with industry as a way of having verifiable categories of sustainable investments and activities.

Mr Liddell noted a sustainable finance taxonomy would assist investors in aligning their portfolio with their values.

“Moves to implement a well-designed taxonomy will help support the transition to a sustainable economy by directing capital flows to technologies that genuinely address climate change and contribute to the achievement of sustainability objectives,” he said.

The Australian Sustainable Finance Institute’s chief, Kristy Graham, on Friday said the absence of a targeted taxonomy in Australia was “a significant barrier” to investment in the nation’s climate solutions and clean energy.

She noted ASFI had already started work on assessing existing offshore taxonomies and expected the local project, in its entirety, would take another 18 months to two years.

But Mr Liddell questioned why the process should take that long given the runway in international markets on similar measures.

“Development of the Australian Sustainable Finance taxonomy kicked off in 2018 at the encouragement of the United Nations Environment Programme Finance Initiative. Given this work commenced five years ago, it’s clear progress has been slow,” he said.

“Given the fact we are faced with a rapidly destabilising climate, and the progress made overseas, it’s not clear why they need another two years to finish the job. It’s our hope they use the impetus provided by the Treasurer to build a world leading taxonomy that will assist the transition to a net zero economy.”

Mr Liddell said the initial “science-based” foundation built by the technical expert group in the European Commission’s Sustainable Finance Disclosure Regulation was a good starting point for Australia.

“Although the final result is far from perfect, earlier iterations of that work, which were anchored in climate science, are a very useful foundation,” he added.

“This work is critical. Having commenced in 2018, progress to date in the development of the taxonomy has been slow, particularly given the ability to leverage work done overseas.

“We hope the federal government’s decision to contribute to the funding of ASFI will allow them to review its road map and move forward with this important reform with a greater sense of urgency.”

As part of the new measures the government is also tipping a further $4.3m into the corporate regulator to assist the clampdown on greenwashing.

The corporate regulator has been active in the area. In February, it signalled further legal action was in the pipeline after filing court claims against retirement giant Mercer, claiming it breached greenwashing rules. The Australian Securities and Investments Commission alleges Mercer misrepresented the nature and characteristics of some of its superannuation investment options, and may have misled consumers into thinking it was more green than it was.

At the time, a Mercer spokeswoman said the firm had co-operated with ASIC regarding its probe, and would “carefully consider” the regulator’s concerns.