“Greenwashing” What is it?

26 March 2024

Melanie Findlay | Rees R & Sydney Jones

Melanie Findlay

Managing Partner, Energy & Environment

“Greenwashing” is the practice of misrepresenting that a product or strategy is environmentally friendly, sustainable or ethical.

ASIC has released in June 2022, an Information Sheet in regard to principles that may apply to the promotion of financial products.

https://asic.gov.au/regulatory-resources/financial-services/how-to-avoid-greenwashing-when-offering-or-promoting-sustainability-related-products/

Investors are making decisions more and more which relate to sustainable products. It is therefore becoming more important for product information to be reliable and accurate. There are already existing requirements which require companies not engage in misleading and deceptive conduct. These requirements extend to the offering or promotion of sustainability products.

According to the Information Sheet, if a company is stating that a product is aiming for a certain sustainability target, the company should clearly state what that target is, when and how it will be met and the grounds for setting that target must be reasonable.

There are also disclosure obligations that companies must make. There are amendments occurring in the disclosure obligation space. Companies should ensure that all published information in relation to an investment decision, particularly in relation to a sustainability-related product are easy to locate.

The Australasian Centre for Corporate Responsibility (ACCR) is currently before the Federal Court of Australia challenging some recent disclosures it alleges were made by Santos . ACCR allege that Santos has recently made claims that natural gas provides “clean energy” and that it has a “credible and clear plan” to achieve “net zero” emissions by 2040. ACCR alleges that these claims amount to misleading or likely to mislead in contravention of the Corporations Act 2001 (Cth).

ASIC has voiced that its purpose in this space is to ensure that consumers can remain confident in the information and investment statements provided to them.

The Information Sheet provides some guidance for businesses who are looking at the changing space of ESG reporting.

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