The Australian Securities and Investment Commission (ASIC) has released its new Corporate Plan, outlining its plans for the next year, and strategic priorities for the next four.
These strategic priorities are:
We have previously addressed the rise in environmental litigation, and the increased focus on this area by Australian regulators. ASIC has now, by addressing sustainable finance in its Corporate Plan, made this a clear priority. While we focus on ASIC’s greenwashing and sustainable finance priority in this article, you can read more about its technology risks agenda in our article on Australia’s first test case brought by ASIC regarding the adequacy of cyber security measures in a company.
ASIC states in its Corporate Plan that there is a “rapid evolution” taking place in sustainable finance practices. This is likely connected to the growing expectation of the public for their investments to be managed in a socially responsible manner. As such, and as outlined in its Corporate Plan, ASIC has stated it will take action to ensure effective climate and sustainability governance and disclosures, and to prevent harm arising from inaccurate climate and sustainability disclosures. It plans to do this by, amongst other things:
Greenwashing, a negative aspect of some sustainable products which has drawn attention in recent years, is a focus for regulators, both within Australia and overseas. According to ASIC, greenwashing refers to the misrepresentation of products or investment strategies as environmentally friendly, sustainable, or ethical. Although ASIC has previously noted issues and developments relating to climate-related disclosures and greenwashing over the last few years, the explicit focus on greenwashing, and sustainable finance practices, in ASIC’s most recent Corporate Plan suggests a greater scrutiny of companies promoting ‘green’ products or services than there has been in the past.
ASIC has highlighted that greenwashing impacts the ability of investors to make informed decisions, can reduce investor confidence, and can threaten a fair and efficient financial system. Preventing greenwashing is therefore crucial to promote informed decision-making and ensure companies are not able to unfairly benefit from ‘green’ credentials.
While not mandatory, ASIC encourages voluntary climate-related disclosures consistent with the Task Force on Climate-related Financial Disclosures (“TCFD”). The TCFD recommends organisations disclose:
ASIC also recommends that organisations consider nine key questions when offering or promoting sustainability-related products:
By considering these questions, an organisation is less likely to engage in misleading or deceptive practices and thus steer clear of ASIC’s gaze. More information can be found in ASIC’s Greenwashing Information Sheet (INFO 271).
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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