Does self-reporting to ASIC reduce enforcement possibility?

ASIC RIAA Joe Longo greenwashing sustainable funds ESG

3 May 2024
| By Laura Dew |
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Fund managers should be monitoring and disclose if they have a greenwashing issue but this may not exempt them from receiving a penalty, according to ASIC chair Joe Longo. 

Speaking on the panel at the Responsible Investment Association Australasia (RIAA), Longo discussed the corporate regulator’s priority of greenwashing enforcement.

This has been identified as one of the regulator’s focuses for 2024; it has already taken action against Active Super, Mercer and Vanguard, among others. 

When running a sustainable or responsible fund, fund managers are expected to consider matters such as whether the product is true to label, whether they have used vague terminology, whether headline claims are potentially misleading, and whether they have explained the investment screening criteria.

Discussing how fund managers can help to self-identify greenwashing issues, he outlined how ASIC takes that into account.

“We welcome the market cooperating so find out for yourself if there is a problem and report that to the regulator. If we bring something to your attention and you immediately take steps to rectify that, then of course, we will take that into account, those factors, if we issue an infringement notice or take enforcement action. 

“Where we don’t see that behaviour, that is a situation where we are more likely to take action.”

While self-reporting a matter could help a company’s case, he warned firms should not assume this meant the regulator would not take action.

“From time to time, we may still commence enforcement action against an entity even if you cooperate with us throughout an investigation or have behaved well because we think it’s in the public interest.

“There may be other factors that warrant action being taken so rather than ‘good behaviour’ being used as a reason not to take action, we would take that into account in making a submission to the court about penalties.

“There is an emerging jurisprudence where we have felt it is the right thing to take action, there’s been an admission of liability by the entity and a much larger penalty has been significantly reduced to acknowledge that.

“Doing the right thing is always a good idea and I would hope people do it whether or not ASIC is paying attention to you.”

In its first greenwashing court case, ASIC recorded a victory in a Federal Court finding that Vanguard broke the law by making misleading claims about certain ESG exclusionary screens applied to investments in an index fund run by the firm.

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