Australia’s financial regulator calls out complacency in ESG reporting

The chair of the Australian Securities and Investments Commission says the practice of “greenhushing” – or not reporting ESG – is “just another form of greenwashing”.

The Australian Securities and Investments Commission intends to continue tackling greenwashing issues in the country’s capital markets and its chair has advised companies not to become complacent about environmental, social and governance reporting.

Asic chair Joe Longo told an audience at the Australian Financial Review ESG summit earlier this week that “changes in ESG reporting tomorrow don’t excuse complacency today” and that “looking ahead to uncertainty doesn’t excuse inaction”, according to a speech published on the regulator’s website.

Longo confirmed that since July last year the regulator had imposed 23 corrective disclosure outcomes, issued 12 infringement notices, and started its first civil penalty proceedings against corporate pension fund Mercer for allegedly misleading investors over sustainability claims of seven “sustainable plus” investment options.

The regulator’s infringement notices register shows that over half of the notices issued so far this year are related to greenwashing, and include oil and gas company Black Mountain Energy and superannuation fund promoter Future Super.

Media service Ignites Asia has reported that Asic has so far fined domestic firms in Australia more than A$150,000 ($100,000) in infringement notices for greenwashing breaches since October 2022. Without disclosing more details, Longo said that further investigations and surveillance operations are currently ongoing.

In his speech, Logo listed four types of “problematic behaviour” falling under the greenwashing umbrella. These include net zero statements and targets lacking a reasonable foundation; misuse of terms such as “carbon neutral”, “clean” or “green”; overstatement or inconsistent application of sustainability-related investment screens; and the inaccurate labelling of sustainability-related funds.

He also denounced companies who engage in so-called “greenhushing” by intentionally avoiding disclosing their environmental claims for fear of facing regulatory scrutiny or reputational damage.

“Domestically, we’ve observed some commentators and firms saying, in effect, ‘we have such a good ESG policy, but we can’t say anything about it because the regulators won’t let us’. . . this kind of response is just another form of greenwashing,” he said.

Now regulators worldwide are increasingly tackling greenwashing – with fines and lawsuits hitting the headlines – it has emerged that some companies are avoiding scrutiny. 

Sustainable Views previously reported that globally, an estimated one in four companies with science-based carbon reduction targets are engaging in greenhushing. While different from greenwashing – which is characterised by making misleading claims about an organisation’s sustainability credentials – greenhushing is considered to be equally damaging to the field of sustainable investing and its ultimate goal of directing capital to Paris Agreement-aligned climate objectives.

Australia has not yet implemented legislation on ESG fund labelling but Asic has published guidelines on how to avoid greenwashing when investment firms promote sustainability-related investment products. 

These are recurring challenges, which regulators in Europe have also been examining. The UK’s Financial Conduct Authority is in the process of establishing investment labels for sustainability funds, while EU supervisory authorities recently expressed concern about greenwashing practices across the bloc.

Meanwhile, the Australian government recently announced an additional A$4.3mn to support Asic in tackling greenwashing and further measures to develop a taxonomy, introduce a sovereign green bonds programme, and the formation of a net zero authority.