What's green and ethical about greenwashing in the promotion of financial products / by Cecilia Anthony Das, Prafula Pearce and Tenielle Henson

Focuses on the growth in ethical consumerism in financial products and the subsequent development of investment options prioritising environmental sustainability and ethical values. Observes the challenges for regulatory bodies in monitoring these products in the investment market and presents examples of action taken by Australian and New Zealand authorities for breaching disclosure duties. Examines whether it is necessary to implement safeguards against ‘greenwashing’ of financial investors who are motivated by ethical and environmental concerns. Overviews the growth of green consumerism since the 1960s and explains the concept of greenwashing as it pertains to investment in financial products. Details the facts of two significant recent cases involving greenwashing via misleading statements in Australia; namely, ‘Australian Securities & Investments Commission v Mercer Superannuation (Australia) Ltd’, Federal Court of Australia, VID366/2022); and three infringement notices issued by the Australian Securities & Investments Commission (ASIC) against investment manager Vanguard Investments Australia Ltd. Underscores the importance of the Vanguard case for the New Zealand Financial Markets Authority (FMA/Te Mana Tātai Hokohoko) as Vanguard operates in both nations via the Trans-Tasman Mutual Recognition (MRSO) regime and the FMA had already issued a warning to Vanguard about a failure to lodge required notices over its disclosure responsibilities. Summarises surveillance initiatives on greenwashing actions undertaken by the ASIC from 1 Jul 2022 to 31 Mar 2023. Examines the enforcement situation and activities in NZ, including an overview of the provisions of the Dec 2020 FMA Disclosure Framework for Integrated Financial Products (IFP) and its Jul 2022 review into the effectiveness of IFP disclosure information. Observes that FMA has yet to initiate direct action against greenwashing activities. Assesses the adequacy of the surveillance methods used by ASIC and FMA and if Australia and NZ can learn from other nations’ experience and implement regulatory changes to address greenwashing more effectively. Proposes recommendations to safeguard against greenwashing.

Includes links to related electronic resources

Audience: Research