Citing concerns over ‘greenwashing’ — misrepresenting the extent to which a financial product is environmentally friendly, sustainable or ethical — CFA Societies Australia said uniform standards are vital.
Lisa Carroll, chief executive of CFA Societies Australia, said: “We believe the CFA Institute Global ESG Disclosure Standards for Investment Products can help asset managers avoid greenwashing outcomes and the need for global uniform standards has never been greater with so much money pouring into the sector.
“Against that, labels such as ESG and socially responsible investing are still largely unregulated within Australia and across the globe. This highlights the need for uniform standards worldwide.
“The Global ESG Disclosure Standards for Investment Products help to meet this need. The Standards provide asset managers with a model set of disclosure requirements which identify key information that should be disclosed to investors, helping to avoid greenwashing.”
CFA Societies Australia said greenwashing is becoming more common as investor awareness about climate change and socially responsible investing increases and more money flows into ESG, sustainable and ethical investment products.
“By being fully transparent and supplying investors with information that is complete, reliable, consistent, clear, and accessible, asset managers can avoid misleading consumers of the green credentials of their product,” said Ms Carroll.
CFA Societies Australia added that ESG investing can be confusing to investors, with terminology often varying widely, even for a single investment product.
“It is not uncommon to see asset managers use the same term to refer to different ESG approaches or types of investment products or to see different terms applying to the same ESG approach or investment type. The combination of these factors has resulted in an increase in ‘greenwashing’, and this threatens to undermine trust in the financial services industry,” Ms Carroll said.
“Asset managers need to protect against this outcome. The Australian Securities & Investments Commission (ASIC), too, is increasing its focus on greenwashing and product providers making claims which can confuse or mislead investors.”
ASIC took its first action against greenwashing in October, ordering ASX-listed energy company Tlou Energy to pay a total of $53,280 to comply with four infringement notices issued over concerns about alleged false or misleading sustainability-related statements made to the ASX in October 2021.
“As entities promote sustainability and green practices as part of their value proposition, they must ensure they can support those statements and have a reasonable basis for doing so,” said ASIC deputy chair Sarah Court.
