ASIC’s Enforcement Approach to Greenwashing

ASIC is currently targeting misleading or deceptive ESG claims made by fund managers. But the foundations of these interventions are not new. 

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Greenwashing enforcement draws on existing and well-established legal prohibitions against misleading or deceptive conduct. The regulator is addressing issues like careless disclosures, unsubstantiated net zero claims and inadequate monitoring by delegated investment managers.

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General Legal Principles Behind ASIC's Action

The concept that it’s unacceptable to engage in conduct liable to mislead the public isn’t recent legislation. Current greenwashing enforcement is based on standard, long-standing statutory prohibitions against misleading or deceptive conduct. 

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Courts assess statements objectively based on how ordinary, reasonable investors are likely to interpret disclosures. In this light, concealing or omitting material sustainability information (also known as greenhushing) may also constitute misleading or deceptive conduct.

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Key Misconduct Areas ASIC Is Targeting

The four core practices triggering regulatory action are:

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1. Net zero statements and targets published without reasonable grounds or factual backing.
2. Unsubstantiated claims using broad terminology like "carbon neutral," "clean" or "green."
3. Overstating or inconsistently applying ESG investment screens.
4. Using unclear labels or imprecise sustainability descriptions in fund offer documents and marketing materials.

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Governance Failures and Third-Party Manager Risks

As ASIC zeroes in on governance and delegate oversight, it expects Responsible Entities (REs) to ensure actual investments match public fund claims. Any delegated portfolio managers buying assets that breach stated ESG criteria can expose REs to regulatory breaches.

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This means that REs must actively supervise delegates’ trading to ensure assets accurately align with ESG promises.

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What Fund Managers Need To Do Now

To make sure your reporting activities remain within ASIC’s expectations, start by: 

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• Checking your funds documentation: Review marketing materials, PDS disclosures and fund names against current holdings.
• Validating claims: Verify that all net zero targets and climate claims have documented, reasonable grounds.
• Tightening internal governance: Strengthen oversight systems to track delegated manager decisions against fund ESG rules.

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Aligning your disclosure framework with ASIC expectations can protect your financial services business from claims of misleading or deceptive conduct. Contact PMC Legal to review your fund documentation and governance processes.

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