An important issue that ASIC is currently facing is the deterrence of greenwashing practices across the Australian business landscape. According to ASIC, greenwashing is ‘the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical’. ASIC’s position is that the practice of greenwashing distorts relevant information that a current or prospective investor may require and take into consideration in order to make their informed investment decisions. This distortion can erode an investor’s confidence in sustainability-related products currently available on the market. As a result, this poses a threat to a fair and efficient financial system.
The inclusion of ethical misrepresentation is one issue that may not be immediately obvious as an offence against greenwashing, however, ASIC’s Deputy Chair Sarah Court is of the view that:
“Greenwashing is not limited to environmental claims but extends to misleading ethical propositions. Entities which seek to promote ethical investing must ensure their statements are accurate and able to be substantiated.”
We have seen a recent spate of activity by ASIC since its first action for ‘greenwashing’ against listed energy company Tlou Energy Limited (Tlou) on 27 October 2022 in connection with Tlou’s alleged false or misleading sustainability-related statements made to the ASX in October 2021.
More recently on 5 January 2023, ASIC issued three infringement notices to a listed energy company Black Mountain Energy Limited (BME) in connection with concerns about alleged false or misleading sustainability- related statements made to the ASX between 23 December 2021 and 8 September 2022. In BME’s case, the notices were issued in relation to statements contained in three ASX announcements made by BME which claimed that:
ASIC was concerned that ‘BME either did not have a reasonable basis to make the representations, or that the representations were factually incorrect’.
Similarly on 23 December 2022, ASIC issued an infringement notice to superannuation trustee Diversa Trustees Limited (Diversa) in further action against alleged greenwashing. In this case, ASIC was concerned that statements by Diversa as issuer of the superannuation product Cruelty Free Super (CFS) on its website may have been false or misleading by overstating exclusions, otherwise known as investment screens. In these statements, CFS claimed to prevent investment in companies involved in ‘polluting and carbon intensive activities’, ‘financing or support of activities which cause environmental and social harm’ and ‘poor corporate governance’.
Further, on 2 December 2022 ASIC issued three infringement notices to investment manager, Vanguard Investments Australia Ltd (Vanguard) in connection with alleged greenwashing. In the case of Vanguard, these notices were issued on the basis of ASIC’s concern that Vanguard’s Product Disclosure Statements for the Vanguard International Shares Select Exclusions Index Funds (the Vanguard Funds) may have been liable to mislead the public by overstating an exclusion or ‘investment screen’ claimed to prevent investment in companies involved in significant tobacco sales. ASIC stated that the Vanguard Funds were structured to exclude certain investments in tobacco, however, while this screen applied to exclude manufacturers of cigarettes and other tobacco products, it did not exclude companies involved in the sale of tobacco products.
In essence, claims that companies are providing services, investments or products that are ethical, sustainable or ‘green’, will always need to have a reasonable basis for these statements. Further, ASIC’s guidance ’How to avoid greenwashing when offering or promoting sustainability-related products’ (INFO 271) should be carefully considered when designing products, or when making any green or ethical claims.
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Matthew Bode, Partner
Elizabeth Ziegler, Associate
Monty Frankish, Paralegal