ASIC issues guidelines for ‘green’ financial products

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ASIC has released guidelines for financial product providers’ sustainability claims as it ramps up the pressure on greenwashing.

The fact sheet, which outlines how ASIC will control greenwashing, is aimed at entities responsible for managed funds, trustees of collective investment companies and trustees of registerable pension entities.

ASIC Vice President Karen Chester said the fact sheet would help them comply with the regulations.

“Labels or outlines of a product’s green credentials should not be misleading,” Chester said.

“Being loyal to the label is not an advantage, it’s a regulatory must.”

ASIC Commissioner Sean Hughes said false claims about product durability would be scrutinized.

“This is and will remain a priority area,” he said.

“ASIC continues to monitor the market and will look for misleading claims about ESG and sustainability.

“This is clearly an evolving area, which is attracting the attention of investors, funds and policy makers.”

ASIC defines greenwashing as the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.

After undertaking a review of the greenwashing of pension and investment products, the commission identified three key areas for improvement.

It was about the need for:

  • Better labeling
  • Sustainability Terminology Definitions
  • Clearer explanations of how sustainability considerations are factored into an investment strategy

The fact sheet published by ASIC outlines several issues that issuers should consider when preparing communications and product information related to sustainability.

A number of them revolved around honesty and clarity by issuers when communicating the product to avoid greenwashing.

ASIC said the use of vague terminology and misleading claims were two ways issuers would fall.

An example of this was labeling a product as a “non-gambling fund”, but allowing it to invest in companies that derive less than 30% of their total revenue from gambling activities.

Another potential mistake was not explaining how sustainability factors were incorporated into investment decisions and stewardship activities.

ASIC said issuers should provide investors with information about the sustainability considerations they take into account, and how those considerations are integrated into investment decisions and stewardship activities.

He also said issuers should be able to explain how they use sustainability-related metrics.

If issuers rely on sustainability-related metrics such as ESG scores, they must disclose the sources, the extent to which the metrics are used when evaluating investments, and the risks or limitations of sustainability. press metrics.

ASIC issues guidelines for ‘green’ financial products

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Last update: June 14, 2022

Posted: June 15, 2022

josh needs

josh needs

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Josh Needs is a reporter for Accountants Daily and SMSF Adviser, the leading sources of news, strategy and educational content for professionals in the accountancy and SMSF industries.

Josh studied journalism at the University of NSW and previously wrote news, feature articles and video reviews for Unsealed 4×4, an off-road automotive website. Since joining the Momentum Media team in 2022, Josh has written for Accountants Daily and SMSF Adviser.

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