Greenwashing and your green investments
Image Credit - Greenwashing megaphone - Ecotextile News
I thought you'd like to know that ASIC* is now turning its attention to whether the ethical investments offered by funds are as 'green' or ESG**- focused as the funds are claiming, these are more in demand, especially from the younger demographic.
The tendency of funds to overstate the extent to which they are environmentally friendly, sustainable, or ethical is termed ‘greenwashing’ in the market. And, according to the Responsible Investment Association Australasia (RIAA)'s recent consumer research report, 86 per cent of Australians expect their superannuation or other investments to be invested responsibly and ethically.
ASIC are looking at ESG more closely because:
there's a lack of clarity about what the green label actually means;
there's no single way of classifying this 'class' of investments; and
many funds are unsure about what standards they are actually using to assess green, ethical or ESG in companies.
Financial systems that are fair and efficient are threatened by misrepresentation of such fund products. The misrepresentation distorts information that an investor may need to make an informed investment decision based on ESG factors. By addressing this threat, we will improve market governance and accountability.
From ASIC's point of view, this is an issue because Corporations Law means that companies are prohibited from making false and misleading statements about how they are managing environmental risks and whether the product they are promoting as ESG-focused…actually is.
For a deeper dive into what Ethical and Sustainable Investing means...
Read our recent blog titled, “If you dig it up, sell it and profit from it…you are responsible for it”, where we did a deep dive into ethical and sustainable investments and ‘green’ ratings;
Check out our YouTube video from the 2021 Sustainable Living Festival on Ethical Money 101;
You can also download the free Viva Guide to Ethical Investing as a starter, for you to reference and compare ethical investments.
*ASIC - The Australian Securities and Investments Commission (ASIC) is the regulator of Australia's markets and financial services. The ASIC ensures that Australia's financial markets are fair and transparent. The ASIC is an independent Commonwealth Government body established by the Australian Securities and Investments Commission Act of 2001 (ASIC Act).
**ESG - Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments.
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