ASIC chair celebrates $230k in greenwashing penalties
The corporate regulator has expanded its approach to greenwashing compliance to consider problematic governance frameworks, adding that financial services “gatekeepers” should be on notice.
ASIC chair Joe Longo has lifted the hood on the corporate regulators approach to corporate greenwashing, adding that it has so far issued 17 infringement notices totalling more than $230,000 in penalties.
Following a tide of recent greenwashing victories, including its first civil penalty action win against Vanguard Investments, ASIC has shared the workings of its sustainability portfolio.
The watchdog has recently broadened its greenwashing focus to consider corporate governance around sustainability representations made to investors.
Entities have a responsibility to exercise care and diligence in overseeing trading done on behalf of their members and ASIC is now actively ensuring that governance frameworks make provision for this kind of assurance as it relates to greenwashing.
In so doing, ASIC said it has observed instances of delegated portfolio managers making investments on behalf of a responsible entity that contradicts entities’ sustainability representations to investors.
Longo told the attendees at the Responsible Investment Association Australasia conference on Thursday that responsible entities “and other gatekeepers in the financial services sector” should take an “active part in identifying and stopping greenwashing.”
“Misleading and deceptive conduct has never been acceptable – and has long been the subject of prohibitions under the law. Greenwashing is simply a recent manifestation of this,” said Longo.
“Yet it’s a practice that is increasingly in the spotlight – against a background of the biggest changes to financial reporting and disclosure standards in a generation.”
The main triggers for ASIC intervention have so far been: baseless or false net zero statements and targets; unfounded use of labels such as ‘carbon-neutral,’ ‘clean,’ or ‘green’; inconsistent application of misrepresentation of sustainability investment screens, and the use of false or vague terms in sustainability-related funds.
In its first major greenwashing victory, ASIC last month secured a Federal Court ruling against Vanguard for misleading investors in its billion-dollar ethical bond fund.
By its own admission, the global investment giant misled its investors on several occasions about the environmental activities of bond issuers.
The court found that as many as 46 per cent of the securities held by the fund had not been subjected to ESG screenings, contrary to the marketing of the fund.
ASIC deputy chair Sarah Court celebrated the victory, adding the outcome should send a “strong message” to greenwashers. The matter has been listed for a penalty hearing in August.
Longo also welcomed the introduction of climate-related financial disclosure reporting in Australia, adding that it will create the “information architecture” needed to support the proliferation of sustainability products and services and capital allocation.
He again urged companies to begin preparing for the new climate reporting regime, adding that “Reporting entities have to be doing the work now – marshalling the data, embedding the capabilities, and keeping the necessary records.”
“It is not simply an option for industry to put off preparations, and then scramble to comply.”
He also voiced his support for the development of an Australian sustainable finance taxonomy and a standardised labelling system for sustainable products.
Australia’s sustainable finance taxonomy will be based on the EU’s existing taxonomy regulations, which aim to provide a “common definition of economic activities that can be considered environmentally stable,” wrote the EU.
Like the “pragmatic” approach ASIC has vowed to take in the early days of the new climate reporting landscape, Longo suggested the regulator’s greenwashing actions will be reserved for pronounced cases of entities giving false or misleading statements.
“You won’t be surprised to hear me say that not one greenwashing case we’ve taken on has been unwarranted or marginal,” he said.
“In cases where entities publish environmental positions that have a sound basis and are demonstrably supported by business plans and investments that substantiate those aims, we are unlikely to be concerned.”
