Greenwashing is misrepresenting a product or service as more environmentally friendly than it actually is.
In the consumer space, it’s misleading conduct. But in the world of finance, it’s holding back the transition to a net-zero emission future.
Concerns about the integrity of Australian carbon offsets have led to closer scrutiny of the claims financial service providers are making about their “clean and green” products.
The government already has some powers to combat real or perceived greenwashing through the corporations act, which carries penalties for misleading conduct. These are enforced by ASIC and the ACCC.
Assistant treasury secretary Penny Sirault said there were a number of protections in place already to prevent greenwashing, but there was more regulation coming down the pipeline to address issues that have been identified to date.
“In November there was a consultation paper released with a draft sustainable finance strategy and that included a range of proposed approaches which could help improve the transparency, integrity, consistency and international operability of statements that are made relating to sustainable finance,” she said.
The consultation process included 130 submissions, generally supporting the premise that improved information and reporting would support trust in the market.
Some discussed the need to phase the rollout of the new requirements to avoid a shock in the market as investors adjust to the new reality.
One of the reform’s centrepieces — the Climate Disclosure Regime — is an example of this.
This will require large businesses and entities to report yearly on climate-related financial risks, opportunities, plans and strategies.
The disclosure requirements are still under development. The bill that would introduce this is currently in committee, with the final report due in May.
ASIC would be responsible for enforcing these laws, should they come into play. Commissioner Kate O’Rourke said greenwashing had been high on their agenda since last year.
Through their existing misleading and deceptive conduct powers, ASIC have brought three civil suits against investment firms allegedly misrepresenting the environmental credentials of certain financial products, as well as 17 infringement notices for less egregious cases, and about 40 changes to inaccurate documents.
“For us, greenwashing is a great concern for individuals, who may have thought they’d bought a financial product or service with particular characteristics that may not be true, but also at a market integrity level,” O’Rourke said.
“People want to move money into companies that are sustainable, and if there’s been misleading activity in relation to that’s poor at the system level.
“We’ve been closely involved in the climate disclosure framework build and that will be a nice complement because there will actually be some mandatory disclosures about climate, emissions.”
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