There are nine questions that fund managers need to consider when launching a fund in order to prevent greenwashing, according to the Australian Securities and Investments Commission (ASIC).
The regulator had announced a crackdown on greenwashing to prevent investors being misled by products that purported to be sustainable.
If funds failed to met the below criteria, it could be find they had breached the Corporations Act 2001 regarding false or misleading statements or by engaging in dishonest, misleading or deceptive conduct in relation to a financial product or financial service.
This particularly arose when representations were made about future matters that were unsupported with reasonable grounds, the regulator said. For example, if a fund that stated it would achieve a carbon emission target by a particular date.
Meanwhile, the product’s Product Disclosure Statements were required to describe the extent to which labour standards or environmental or ethical considerations were taken into account when selecting, retaining or realising investments related to the product.
ASIC’s questions were:
- Is your product true to label?
- Have you used vague terminology?
- Are your headline claims potentially misleading?
- Have you explained how sustainability-related factors are incorporated into investment decisions and stewardship activities?
- Have you explained your investment screening criteria? Are any of the screening criteria subject to any exceptions or qualifications?
- Do you have any influence over the benchmark index for your sustainability-related product? If you do, is your level of influence accurately described?
- Have you explained how you use metrics related to sustainability?
- Do you have reasonable grounds for a stated sustainability target? Have you explained how this target will be measured and achieved?
- Is it easy for investors to locate and access relevant information?
