ASIC intensifies greenwashing crackdown amid national disclosure overhaul

With major changes on the horizon for Australia’s climate risk disclosure landscape, ASIC has reaffirmed its commitment to maintaining trust in sustainable finance-related products and services.

The Australian Securities and Investments Commission (ASIC) has made 47 regulatory interventions to address greenwashing misconduct during the 15-month period up to 30 June 2024, according to recent data from the regulator.

This includes the commencement of two Federal Court proceedings and over $123,000 in infringement notice payments, in addition to obtaining 37 corrective disclosure outcomes by various entities.

ASIC commissioner Kate O’Rourke said its surveillance indicates “ample room” for improvement for product issuers on the quality of disclosures and the data underpinning them.

“Investors and consumers are entitled to accurate and reliable information so they can make informed and confident investment decisions. Greenwashing claims mislead investors and consumers, and undermines confidence,” O’Rourke said.

“Where we’ve identified greenwashing misconduct, ASIC has intervened to protect investors and consumers, and to maintain market integrity.”

Outlined in ASIC’s interventions on greenwashing misconduct: 2023–2024 report, the regulator’s key recommendations include the necessity for entities to ensure that investments made by their managers or submanagers are independently verified as being consistent with the claims being made about the funds’ sustainable investment strategies.

The report also calls for clear explanations of investment exclusions or screening criteria.

Moreover, ASIC said that entities disclosing climate-related metrics and targets voluntarily should consider and be informed by the disclosure requirements set out in the Australian Sustainability Reporting Standards (ASRS), once published.

Climate risk disclosure passes Senate

Namely, on Thursday, the Albanese government passed legislation to establish Australia’s climate risk disclosure framework, introducing standardised reporting requirements for businesses to ensure they are making high-quality, climate-related financial disclosures.

Reporting requirements will commence from 1 January 2025 for Australia’s largest listed and unlisted companies and financial institutions and other large businesses will be phased in over time.

“ASIC acknowledges the significant changes ahead with the proposed introduction of mandatory climate-related financial disclosure requirements for large businesses and financial institutions,” the regulator said.

Highlighting that its supervision and enforcement of this new regime will be “pragmatic and proportionate”, ASIC promised it will engage closely with industry as it develops appropriate guidance to help it build the capability required to meet the new obligations.

“Throughout the transition to the proposed mandatory climate reporting regime, ASIC will act to ensure current disclosure and governance standards are maintained and that entities comply with their existing legal obligations, including the longstanding prohibition against misleading and deceptive conduct,” ASIC said.

The regulator won its first greenwashing civil penalty action in March, against Vanguard Investments, and in June, the Federal Court found Active Super made misleading ESG claims in a greenwashing action brought by ASIC.

Also in a landmark case for ASIC, the Federal Court earlier this month ordered Mercer Super to pay a $11.3 million penalty after it admitted it made misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.