• Australian regulators ASIC and the ACCC are cracking down on greenwashing
  • ASIC chairman warns against ‘greenhushing’
  • Stockhead reached out to Seven Advisory founder and director, Mary Delahunty

 

The ESG investment landscape in Australia is about to undergo a major transformation as regulators begin to ramp up their clampdown on greenwashing.

In February, corporate watchdog ASIC launched its first ever civil lawsuit against greenwashing, alleging that super fund Mercer offered “sustainable” funds that misleadingly claimed to exclude investments in fossil fuels, alcohol and gambling.

The court case is being watched closely as it could set a precedent for the way executives ensure the accuracy and transparency of their marketing materials and disclosures.

The lawsuit comes as the Federal Government recently announced a further $4.2 million funding for ASIC to tackle greenwashing and other sustainable finance misconduct.

Meanwhile, competition watchdog ACCC has recently undertaken an internet sweep of a sample of businesses to assess the environmental claims made.

The ACCC has published the results, which found that of the 247 businesses reviewed during the sweep, more than half (57%) were identified as having made ‘concerning claims about their environmental credentials’.

Whilst there is currently no explicit law against the ‘greenwashing’, there is a law against false representation and advertising.
 

Longo warns against ‘greenhushing’

ASIC chairman Joe Longo is also slapping companies for “greenhushing”, a practice where companies choose to not communicate their sustainability efforts for fear of legal action.

Longo says greenhushing is just another form of greenwashing, and is “an attempt to garner a ‘green halo’ effect without having to do the work”.

“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’,” Longo told the AFR ESG summit.

Longo, however, said that ASIC won’t be going after companies it considers to be giving accurate and truthful statements.

“Any company which is accurate and transparent in its disclosures has nothing to fear.”

 

Seven Advisory’s Mary Delahunty breaks it down for us

To put these matters in perspective, Stockhead reached out to ESG expert, Mary Delahunty.

Delahunty is the former head of impact for Aussie super fund HESTA, and has stepped out of the superfund industry to start her own consultancy firm, Seven Advisory.

 

Seven Advisory’s Mary Delahunty

The consultancy focuses on authentic and responsible  decisions in investments, social progress, equality and the environment.

Here’s an except of the interview.

 

What is your view on the regulators’ latest move?

“I think it’s a welcome decision for the ASIC and ACCC to focus on making sure product descriptions deliver what they say,” Delahunty told Stockhead.

“Obviously this area is quite attractive to consumers at the moment, and it is a fast moving area.

“We have suffered from 10 years of inaction in Australia where our European and other counterparts have made great strides.

“We never did get that work done, and so the Australian regulators are now in catch up mode, because there has been just a gulf of policy missing in this space.”

 

How will this impact the industry?

“It will have wide ranging impacts for the industry, in both institutional and retail sense,” Delahunty explained.

“It will also impact corporates, for example in the issuance and labelling of corporate debts, so it is a multifaceted area of concern for the regulators.

“But the way in which this will have an impact from a consumer point of view is that hopefully over time, you’ll see some consistency of language used to describe terms that already might have an implied meaning to you as a consumer. Words like ‘sustainability’, or ‘environmentally clean’, or ‘friendly’.

“So things are moving from the realm of being marketing puffery, into having applied meaning and therefore able to influence a consumer.”

 

What is the difference in approach between Australia and our counterparts?

“You can see there’s a difference overseas when you look at product labelling for example in the US,” said Delahunty.

“They’ve got a little bit more of a consumer action and litigious approach to getting product labelling right, and you see a lot more class actions and legal processes that are led by consumers.

“In Europe, it’s more of a policy led approach, as in, here is the framework and if you want to say this, it has to be this.

“But in Australia, we’re still trying to sort it out.

“Here, we’re looking more at complex investors like super funds, and although they offer a product, that product is made up of other businesses and entities that also need to comply with consumer laws and anti-greenwashing sentiment.

“So the pressure here is on large complex investors like super funds, which is fair to a point, but they are a collection of other entities. And so everyone needs to lift at the same time.”

 

Do you agree with Longo’s comments on greenhushing?

“In practice, greenhushing might be product issuers who are heeding the words of the regulators,” Delahunty said.

“They’re removing some public statements while checking on the veracity of them, and then they may go to putting them back up again.

“So I’m not sure if I agree that’s as bad, or as misleading as greenwashing.

“It actually might be a good thing, because product issuers can make sure that they’re not misleading a consumer.

“We don’t want an environment where finance product issuers, who can change the world by moving capital, to operate in an environment where they are afraid to say things.

“So, I disagree with his statement. Greenwashing is misleading a consumer, whereas taking statements down or rechecking them is entirely appropriate.”

 

What is the challenge going forward?

“I think the more we can standardise language and reporting, the better we’ll be at managing the risk of greenwashing,” Delahunty said.

“I guess one of the challenges is that standardisation at the moment is largely focused on the environment.

“We still have social standardisation claims to get to, as well as claims about labor practices, wellbeing, etc.

“And so we might see a move from a focus on greenwashing to the focus on ‘rainbow washing’, which is a good use of the entire SDGs to claim that you’re good people.”

 

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