Regulation of ESG related disclosures is a rapidly evolving area globally. This week, ASIC made a significant foray into the area, with the release of Information Sheet 271: How to avoid greenwashing when offering or promoting sustainability-related products.
The new Information Sheet provides guidance to issuers of financial products on statements that may be construed as ‘greenwashing’. Although it focuses on financial product disclosures, it provides useful guidance for issuers of prospectuses and other disclosure documents for fundraising, where many of the regulatory rules are similar.
The Information Sheet offers guidance on avoiding ‘greenwashing’ disclosure risks including:
- using clear and well-defined terminology
- ensuring any headline claims about sustainability accurately reflect the substance
- giving enough detail so that investors can understand a sustainability claim, and
- ensuring sufficient detail on how and when claimed sustainability targets will be met.
This release is a first step for Australian regulators in the corporate financial sector and expect to see further developments as this issue evolves. ASX is also likely to become more active in this area, managing similar disclosures by listed companies.