Green tick for ASIC ‘Greenwashing’ study

From

Angela Ashton

Leading independent investment consulting firm, Evergreen Consultants has commended the Australian Securities and Investment Commission (ASIC) for its current research project into the extent of ‘Greenwashing’ and its actions in warning against ‘Greenwashing’[1].

Greenwashing is the practice of misrepresenting or overstating an investment fund’s commitment to ethical or socially responsible investing, or Environmental Social and Corporate Governance (ESG) practices.

Evergreen Consultants founder Angela Ashton said: “ESG or responsible investing is arguably the single largest trend in the investment universe today.

“Investors are increasingly attracted to funds labelled ESG, or socially responsible, on two counts:  namely a desire to support ethically and environmentally responsible actions and a recognition that such funds perform better than funds not exhibiting this commitment.

“Accordingly, there is a tendency for some funds to mis-label or exaggerate their actual commitment to responsible investing.”

She added: “At Evergreen we believe the greenwashing problem is real. In our experience, the incidence of greenwashing is in the order of 5-10% of funds bearing the ESG or responsible investing label.”

ASIC is currently researching the problem and Evergreen fully supports this study, noted Ashton.

ASIC’s review follows on from its recent review of climate risk disclosure by large funds.

ASIC Commissioner Cathy Armour’s warning to boards in the July 2021 issue of Company Director magazine published by the Australian Institute of Company Directors is clear and unequivocal:

‘Boards should be mindful that prohibitions in the Corporations ACT 2001 on misleading and deceptive conduct and false and misleading statements apply in relation to financial products such as securities or interests in funds. Accordingly, we encourage boards to look out for any greenwashing – and to ask whether their company’s disclosure around environmental risks and opportunities or their funds promotion of ESG-focused investment products accurately reflects their practices in this area.’

In this article Commissioner Armour notes the ‘global unease about the risks of greenwashing’ and confirms ASIC participation in the International Organisations of Securities Commissions’ Sustainable Task Force addressing the greenwashing issue. She also notes the current actions of the EU and the US Securities and Exchange Commission in addressing definitions and clarity in labelling.

“Evergreen reviews and rates funds on seven separate ESG or responsible investing criteria and is working on a new single score fund rating system to assist investors and advisors in assessing a fund’s ESG credentials,” Ashton said.

“We will always try to bridge the knowledge gap for advisers when it comes to properly accessing ESG options for clients.

“Keeping this objective in mind, our latest tool, to be launched soon, will be a specialist responsible investing index that will be a deep dive into ESG funds, housing scores and offering functionality around searching for ESG funds, building portfolios whilst also allowing  comparisons against sector averages,” she added.

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[1] https://asic.gov.au/about-asic/news-centre/articles/what-is-greenwashing-and-what-are-its-potential-threats/

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