AUSTRALIA Trends and Developments Contributed by: Michael Lawson, Nicole Brown, Lizzie White and Tamaryn Leach, MinterEllison
INFO 271 complements ASIC’s true-to-label and marketing review initiatives, requiring a high standard of clarifying disclosure for sustainabil - ity-related financial products. ASIC has empha - sised the importance of transparency regarding claims and terminology related to ESG, “green” or “sustainable” products. They have made it clear that product issuers who use these claims or ESG labels must disclose and thoroughly explain them. INFO 271 sets out nine sustain - ability-related disclosure principles (Principles). These include: • use of jargon terminology; • misleading headline claims; • disclosing sustainability-related measures, benchmarks and screens; and • inadequate explanation of sustainability and stewardship claims. Through enforcement of the Principles, ASIC has now provided additional guidance on their scope and application. One such example is Austral - ian Securities And Investments Commission v Mercer Superannuation (Australia) Limited ACN 004 717 533 [2024] FCA 850, which, in particular, provides that ESG disclosure to investors and potential investors must be consistent across all platforms, transparent and accurate and that Australian financial services licensees and other market participants should exercise dili - gence in adhering to such claims. The outcome of the proceedings reveals that ASIC’s scrutiny is not limited to disclosure documents but also includes websites and social media. Extra care should be taken with materials published online, noting that separate contraventions will occur on each occasion a representation is made (ie, each time the webpage is viewed). The case Australian Securities and Investments Commission v Vanguard Investments Australia
Ltd (No 2) [2024] FCA 1086 illustrates that ESG disclosures must be specific and verifiable based on relevant research or screening against the applicable ESG criteria. Additionally, it empha - sises that ESG claims made in short-form medi - ums, such as social media, are also held to the same high standards. The case also provides that an organisation will still be responsible for the accuracy of any disclosures it makes, even where a third-party provider has been engaged for the index and ESG research. The limitations or rules of third-party indexes and methodolo - gies should be clearly explained and disclosed to investors. These enforcement actions taken by ASIC send a clear message to those providing financial ser - vices in Australia that the bar has been raised and more detail and disclosure are required to avoid greenwashing and, in turn, ASIC enforce - ment action. Foreign financial services providers A key area of interest for foreign investment managers is the state of play of the regime for regulating foreign financial services providers (FFSPs) in Australia. The FFSP Regime has been in a state of regula - tory uncertainty following a prolonged period of ongoing transitional arrangements. By way of background, in Australia, FFSPs to wholesale clients have historically been able to benefit from class order relief, exempting them from the need to hold an AFSL (Australian Finan - cial Services License), including by virtue of the “sufficient equivalence” relief (also known as “passport relief”) and “limited connection” relief, subject to transitional arrangements.
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