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Greenwashing: ASIC’s Recent Actions on this Current Investing Issue

ASIC has taken a range of enforcement action recently to address the issue of ‘greenwashing’. Action so far has focused on managed funds and companies raising capital from retail investors. This comes as ASIC Deputy Chair, Karen Chester, has spoken to the Responsible Investment Association Australasia (RIAA) about the impact of greenwashing on market transparency and integrity.

ASIC identifies greenwashing as the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.

In her speech, Ms Chester noted, “Greenwashing distorts the information that a current or prospective investor might need to make informed investment decisions. In doing so it results in capital misallocation. Greenwashing corrodes investor confidence in the market for sustainability-related financial products and corporate strategies.”

In Australia, the number of assets managed using a responsible investment approach now accounts for 43% of the total market for managed funds.


In May 2023, ASIC released a short report detailing the 35 interventions it has made in response to the surveillance it undertook from 1 July 2022 to 31 March 2023 focused on greenwashing. ASIC reviewed a variety of documentation, including marketing material, Product Disclosure Statements (PDS), market announcements and company websites. The interventions resulted in:

  • 23 corrective disclosure outcomes;
  • 11 infringement notices issued; and
  • the commencement of civil penalty proceedings (in one of the 11 infringement notice cases);
  • 14 Responsible Entities amending their disclosure in 21 PDSs;
  • 1 managed fund changed its name;
  • 9 listed companies amended disclosure documents, company websites or market announcements.

ASIC’s goal in its enforcement action is to prevent harm to investors, consumers and market integrity and to deter greenwashing misconduct. The enforcement identifies the following themes:

  • Net zero statements and targets: ASIC identified instances where such claims did not have a reasonable basis or were factually incorrect. These issues were identified in prospectuses, websites and market announcements.
  • Use of terms such as “carbon neutral”, “clean” or “green”: ASIC identified instances where such claims had no reasonable basis, where companies had either insufficient evidence or where the terms were used in a way that was considered too vague.
  • Fund labels: ASIC identified a number of instances where the financial products or managed funds were not true to label. For instance, where the name of the product or fund included sustainability related language that was inconsistent with the investments or investment process of the fund.
  • Scope and application of investment exclusions and screens: ASIC identified instances of screens and exclusion criteria which were too vague or overstated in a PDS or associated website of financial products.

In July 2023, ASIC commenced proceedings against Vanguard Investments Australia, alleging misleading conduct in relation to ESG exclusion screens applied to investments in its fund. ASIC alleges that Vanguard represented all investments in its Vanguard Ethically Conscious Global Aggregate Bond Index Fund were screened against certain ESG criteria, when in fact the appropriate research was not conducted by Vanguard. ASIC Deputy Chair, Sarah Court stated:

‘In this case, Vanguard promised its investors and potential investors that the product would be screened to exclude bond issuers with significant business activities in certain industries, including fossil fuels.  

‘We consider that the screening and research undertaken on behalf of Vanguard was far more limited than that being promised to investors, and we consider this constitutes another example of greenwashing.’ 

Disclosure Tips

It is important that financial firms have prescribed processes to ensure ESG-related statements are verified before they are published. This means checking that the statements are factually accurate, have a reasonable basis and that the appropriate research has been conducted to support any ESG-related statements.

When preparing PDSs, marketing material and other disclosure documents, issuers and advisers should consider:

  • Whether the terminology is vague or specific. Is there clarifying language included which provides a clear explanation of what is meant?
  • Is the labelling of the product or fund clear?
  • Is the headline claim potentially misleading?
  • Is there a reasonable basis for the sustainability target?
  • Are the investment screening criteria sufficiently explained? Is the screening criteria consistent with how the product or fund is advertised? Do you monitor the product or fund to ensure investments continue to meet the screening criteria?
  • Are exclusions in investments promised and if so, are these exclusions upheld?
  • Can investors easily locate and access relevant information?

Clear and high quality disclosure and marketing materials are valuable to all players in the financial services industry and help financial firms to ensure compliance with their obligations in relation to disclosure.

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