By Nick Hedley
The Australian Securities & Investments Commission (ASIC)
says the country’s superannuation funds need to be better at avoiding ‘greenwashing’
– or misrepresenting the extent to which their products and strategies are environmentally
friendly or ethical.
Environmental, Social and Governance (ESG) assets are projected
to exceed US$53 trillion by 2025 and represent more than a third of total
assets under management, according to ASIC. With this in mind, the regulator
and its peers in the U.S. and other markets are working to ensure greater
transparency.
ASIC has published a set of guidelines for superannuation
funds after a review of the industry found “some areas for improvement.”
The regulator said in a statement that when promoting
solutions, funds need to use clear labels, define the sustainability
terminology they use, and clearly explain how sustainability considerations are
factored into their investment strategies.
ASIC Deputy Chair Karen Chester said: “Managed funds and
super funds are responding to the increasing investor demand for
sustainability-focused investments. Investors are not only motivated by their
values here, but also by long-term financial returns.”
“Labels or headline statements about a product’s green
credentials should not be misleading. 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.”
ASIC Commissioner Sean Hughes said greenwashing “will remain
a priority area of focus” and the regulator will continue to monitor for
misleading claims.
In May, the U.S. Securities & Exchange Commission (SEC) proposed
new rules aimed at stamping out the practice.
SEC Commissioner Allison Herren Lee said at the time that
due to “explosive demand” for sustainable investment solutions, there is an increasing
need for consistent, comparable and reliable information to help investors make
informed decisions.
The regulator’s proposals focused largely on three areas: Categorizing
the various types of funds engaged in sustainable investing; whether authorities
have calibrated disclosures sensibly for each category; and when and how to
require disclosures of greenhouse gas (GHG) emissions.