Ethical Investing Sees A New Front: Greenwashing

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Investors are becoming increasingly conscious of the products and services they put their funds in. Serious consideration is placed on the environmental stance of companies, and with Australia’s move to zero-carbon, the government incentivises companies who put effort into becoming ‘green.’ However, regulators uncovered that many only present themselves as ‘green.’

ASIC’s First Court Action Against Superannuation Fund

The Australian Securities Investment Commission (ASIC) defines greenwashing as “the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.”

Greenwashing, also known as social washing, is becoming a common practice wherein sales pitches are crafted so that even if a product or service may be harmful to the environment, they are presented as having positive effects on the planet.

Before ASIC stepped in to challenge this malicious practice, industries that do this were typically self-policed. No one questioned their claims, nor did any investigations. However, in a press release, ASIC asserted its presence in policing industries, noting that sustainability-related claims need to be accurate.” ASIC soon launched its first court action, targeting a superannuation fund.

Risk of Misleading Marketing and Greenwashing

According to Sarah Court, ASIC deputy chair, “there is increased demand for sustainability-related financial products, and with that comes the growing risk of misleading marketing and greenwashing. Financial products must reflect their true position if they make sustainable investment claims to investors and potential investors. If investments in certain industries like fossil fuels are said to be excluded, this promise must be upheld.”

Right before 2022 ended, ASIC went to work by imposing fines on supers. Vanguard Investments was fined $39,960 when it was discovered that one of its product disclosure statements specifically noted that its index funds did not include shares of companies involved in tobacco when in fact, it did.

HWL Ebsworth partner Polat Siva noted that ASIC’s actions would help enforce corrective measures in this area. Siva added,This is an emerging area. ASIC took action in October, and infringement notices have been issued against three more parties since then.”

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