ASIC Combats Greenwashing Through Regulatory Actions

The Australian Securities and Investments Commission (ASIC) has announced its efforts to combat greenwashing by taking 35 regulatory actions between July 2022 and March 2023. However, ASIC believes that a more effective long-term solution to this issue lies in implementing high-quality disclosure standards catering to investors' information needs.

In preparation for upcoming global standards for Sustainable Finance, ASIC is actively working to ready the industry for their implementation. These standards aim to counteract greenwashing practices, which have been eroding investor confidence in sustainability-related financial products and corporate strategies.

ASIC has made the fight against greenwashing a top priority, and it is actively addressing the issue through proactive surveillance and enforcement of governance and disclosure standards. Karen Chester, the deputy chair of ASIC, emphasizes the importance of meaningful, responsible, and transparent disclosure in effectively combating greenwashing practices.

Reflecting on her previous article for Company Director, Chester recalls the release of ASIC Information Sheet 271, which provided guidance on avoiding greenwashing practices when offering or promoting sustainability-related products. She urges superannuation and investment funds and directors to review their practices using the nine questions outlined in the information sheet. These questions were formulated based on ASIC's surveillance of current practices and signalled a shift towards a more assertive enforcement approach.

Chester highlights ASIC's publication of a May report detailing the 35 interventions against greenwashing carried out by ASIC between July 2022 and March 2023. These interventions ranged from securing timely corrections, issuing public infringement notices, and initiating civil penalty proceedings. The report aims to bring transparency to the reasons and outcomes of ASIC's interventions and guide market participants on avoiding greenwashing practices in disclosures and representations.

ASIC intervenes in cases where net zero statements and targets lack a reasonable basis or contain factual inaccuracies. Additionally, they take action when terms like 'carbon neutral,' 'clean,' or 'green' are used without reasonable substantiation. ASIC also addresses cases involving inaccurate labelling or vague terminology in sustainability-related funds. Furthermore, they scrutinize the scope or application of sustainability-related investment screens or exclusions, ensuring they are not vague or overstated in Product Disclosure Statements (PDS) or associated websites for ESG-related financial products.

Chester stresses ASIC's support for a mandatory climate change-related disclosure regime in Australia, aligned with the global baseline developed by the International Sustainability Standards Board (ISSB). She affirms ASIC's role in the Council of Financial Regulators Climate Working Group, which supports the government's climate reporting and broader sustainable finance strategy, including initiatives against greenwashing and policies promoting disclosure such as ESG labelling. These policy initiatives are expected to establish clear guidelines that enhance comparability in climate-related disclosures and address sustainability concerns over time.