This article follows a session on this topic held at the ob体育 Annual Forum (AAF), 3-4 November 2022. Catch up on session highlights from the Forum.
The session was moderated by Ticky Fullerton, Business Editor at Large, The Australian.
Panel:
- Karen Chester, Deputy Chair, ob体育
- Patricia Cross, Chair, OFX, Independent Non-Executive Director, Transurban Limited, Board Member, Future Fund
- Dr Guy Debelle, Chief Financial Officer, Fortescue Future Industries
- Emma Herd, Partner, Climate Change and Sustainability Services, Ernst & Young
Key points
- This AAF session explored sustainable finance and how financial markets in Australia and around the world are responding to an increasing demand for sustainability-related products.
- Many entities are under pressure to make sustainability and climate-related disclosures and to demonstrate how their investment and corporate actions align with their claims.
- ob体育 has identified sustainable finance as a key strategic priority, with a particular focus on deterring greenwashing. We are currently investigating a number of listed entities, super funds and managed funds in relation to their sustainability-related claims.
Sustainability-labelled investments have more than doubled between 2019鈥�21 in our region alone, according to Morningstar Australia. As the market continues to grow and develop, transparency and trust are paramount to maintaining investor confidence.
Reducing the harms of greenwashing
As entities promote their sustainability and green practices, they risk overrepresenting the extent to which their products or investment strategies are environmentally friendly, sustainable or ethical. A practice known in the market as 鈥榞reenwashing鈥�.
ob体育 has taken its first action for 鈥榞reenwashing鈥� against listed energy company Tlou Energy Limited. ob体育 warns entities promoting their sustainable and green practices as part of their value proposition that they must be able to support their sustainability-related claims.
In discussing ob体育鈥檚 approach to greenwashing ob体育 Deputy Chair Karen Chester said,
鈥榊ou can鈥檛 overstate the economic costs of greenwashing. ob体育 cannot be an island here which is why we work with our regulatory colleagues.鈥�
Ms Chester talked about concerns in 鈥榯he compounding lack of confidence that comes with greenwashing鈥�.
For companies, 鈥楾here is already a clear line in the sand. Disclosure has to be made on a reasonable basis. It can鈥檛 be purely aspirational鈥�.
鈥楴ow ob体育 is at the compliance and enforcement stage with greenwashing, and we鈥檝e got investigations underway to make sure we have a good message of deterrence鈥�.
Greenwashing remains a priority for ob体育. ob体育 continues to monitor the market and will take enforcement action where there are breaches.聽
Climate disclosure and governance
The governance and disclosure of sustainability and climate-related matters is a global priority.
Late last year the International Sustainability Standards Board (ISSB) was established and tasked with delivering a global baseline of sustainability and climate-related disclosures for capital markets.
While international developments on climate related disclosure standards are moving at pace, ob体育 is actively engaged and supports the work of the ISSB.
Ms Chester spoke about ob体育鈥檚 continuing focus on supporting effective climate and sustainability governance and disclosure practices.
鈥楾he biggest risk is investors don鈥檛 have good quality, comparable information to get capital calls right. The price of capital will be too high if we have fragmented standards.鈥�
ob体育 continues to encourage directors and senior management of listed companies to voluntarily report under the Taskforce on Climate-related Financial Disclosures (TCFD) framework. 鈥榃e need to be doing global best practice here in Australia鈥�, Ms Chester said. 鈥楢nd with the progress being made on international standards we need to move apace here now.鈥�
ob体育 is Australia鈥檚 corporate, markets and financial services regulator.