ASIC cracking down on ‘greenwashing’

On 2 May 2024, ASIC Chair Joe Longo delivered a speech at the Responsible Investment Association Australasia (RIAA) Conference, outlining ASIC’s growing commitment to curb ‘greenwashing’, that is, the practice of mispresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.

This recent focus on greenwashing comes against the background of the new Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, which was introduced to the House of Representatives on 27 March 2024 and, if enacted, will establish the framework for a new mandatory climate disclosure reporting regime in Australia in line with international standards and jurisdictions.

While the term ‘greenwashing’ is relatively new, the underlying concept is not. Mr Longo stressed that greenwashing is simply a recent manifestation of something the law has long prohibited: misleading and deceptive conduct. It is a long-standing and well-established legal obligation that statements made to the public ought to be accurate, substantiated, and made on reasonable grounds.

Further key takeaways from Mr Longo’s speech include:

• Compliance equals good business: compliance with the climate reporting regime will build trust with investors, and the best business is one that has the trust of its investors and consumers. Since compliance builds trust, and greenwashing erodes it, it is in everyone’s best interests to be compliant.
• Omitting material sustainability-related information, ‘greenhushing’, can also be misleading and deceptive.
• ASIC’s enforcement approach when it comes to greenwashing will be focused on statements made, often in marketing or promotional campaigns, with little to no substance to back them up.
• ASIC is however unlikely to be concerned with entities who publish environmental positions that have a sound basis and that are demonstrably supported and substantiated.
• When selecting matters for enforcement action, ASIC will consider which of those matters are most likely to have a broad reach—i.e. whether the enforcement will have a deterrent effect that will send a wider compliance message to the market.

ASIC has already proved its willingness to crackdown on greenwashing in its first ever greenwashing court case. On 28 March 2024, the Federal Court handed down a decision in favour of ASIC in ASIC v Vanguard Investments Australia Ltd [2024] FCA 308, in which Vanguard was found liable for false and misleading representations about the ESG screening criteria for its ‘Ethically Conscious Global Aggregate Bond Index Fund’. These representations were made to the public in a range of communications including a YouTube interview. A further hearing is listed for 1 August 2024 to consider the relief sought by ASIC.

ASIC’s current interest in greenwashing is clearly not in isolation and comes at a time of an influx of sustainability-related products into the market, as well as increasing global scrutiny on the environmental impact, position, and resilience of corporate entities. The overall takeaway for entities is that the time to take the implications of greenwashing seriously is now.

‘Greenwashing: A view from the regulator’ can be found here.

Should you have any questions regarding greenwashing or misleading and deceptive conduct in general, please contact Matilda Franklin or Cheryl Sun by email to mfranklin@mphlawyers.com.au or csun@mphlawyers.com.au or on (08) 9221 0033.