ASIC’s focus on the areas comes as global regulators target misrepresentations about the extent to which financial products or investment strategies are environmentally friendly, sustainable or ethical. It follows German authorities investigating against fund manager DWS last month, which came after the US Securities and Exchange Commission took action against BNY.
ASIC set out various examples of what it would consider misleading, including claims not being true to their label, using vague terminology, or a lack of explanation about investment decision processes. The guidance is targeted at the responsible entities of managed funds, corporate directors of corporate collective investment vehicles and the trustees of superannuation entities.
ASIC deputy chair Karen Chester said the information sheet was about helping issuers comply with their existing regulatory obligations.
“Labels or headline statements about a product’s green credentials should not be misleading. Being ‘true to label’ is not a nice-to-have, it’s a regulatory must-have,” she said.
“It’s also a must-have for investor confidence and trust. And a must-have for both fair and efficient market outcomes here. Misdirected investment here will inevitably be at great economic cost.
Sustainability-labelled investments have more than doubled between 2019 and 2021 in Asia and ASIC cited global figures with ESG assets projected to exceed $US53 trillion by 2025, representing more than a third of total assets under management.
Issuers will have to deal with uncertainty around the definitions and taxonomy to be applied to ESG, as the International Sustainability Standards Board continues to develop global standards. ASIC said issuers who report climate-related information under the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) framework, “will be well-placed to transition to any future standard”.
Last month, German police raided the offices of fund manager DWS, majority-owned by Deutsche Bank, as part of a probe into allegations of greenwashing relating to claims in its annual report relating to the assets invested using environmental, social and governance criteria.
Also last month, the US SEC charged BNY Mellon Investment Adviser for misstatements and omissions about ESG considerations making investment decisions for certain mutual funds that it managed. BNY paid a $1.5 million penalty to settle the charges.