Australian watchdog warns firms against ‘greenhushing’ in response to regulatory crackdown

ASIC chair Logan said the regulator will ‘not look kindly’ on those who are not prepared for upcoming climate regulatory and disclosure requirements.

The Australian Securities and Investments Commission (ASIC) chair Joe Longo has urged companies not to stop reporting ESG information as the regulator takes action to curb greenwashing.

In a speech at the Australian Financial Review’s ESG summit on Monday, he said: “In response to ASIC’s scrutiny of greenwashing, some companies may be tempted to cease all voluntary disclosure, chasing greenwashing with a little ‘greenhushing’.”

In November, ASIC announced greenwashing as one of its main enforcement priorities for 2023, saying it would “closely monitor for misleading conduct and claims of greenwashing that cannot be sustained, and take enforcement action where necessary”.

Since July last year, the financial regulator has secured 23 “corrective disclosure outcomes”, issued 12 infringement notices and started its first civil penalty proceedings, according to a report published last month.

Longo said on Monday that the Australian financial regulator has observed some companies claiming to have a good ESG policy but to be unable to talk about it due to regulation. He dismissed this as “just another form of greenwashing – an attempt to garner a ‘green halo’ effect without having to do the work”.

He cited a South Pole report from last year which found that nearly one quarter of 1,200 surveyed companies had decided not to discuss their net-zero commitments.

More broadly, Longo said that ESG reporting is the next stage in a series of moves towards greater transparency and higher disclosure standards. He warned, however, that “changes in ESG reporting tomorrow don’t excuse complacency today”.

“We have to be asking ourselves what more can be done now to help strengthen and improve our standards of governance and disclosure in Australia, eliminate and correct greenwashing, and prepare us for the broader evolution of the ESG space,” he added. “Change is coming – and it won’t look kindly on those who aren’t prepared.”

According to Longo, ASIC has encountered four main categories of greenwashing: net-zero statements and targets “without reasonable basis”, or which are factually inaccurate; terms including “carbon neutral”, “clean”, or “green” which “aren’t founded on reasonable grounds”; the overstatement or inconsistent application of sustainability-related investment screens; and the use of inaccurate labelling or vague terms in sustainability-related funds.

Longo’s greenhushing comments come as Europe’s financial watchdog ESMA said that clarifying what qualifies as sustainable investment is “crucial” in mitigating greenwashing risks, in a report to the European Commission published last week.

It recommended additional clarification around minimum contribution to sustainable objectives under the EU’s Sustainable Finance Regulation Disclosure (SFDR).

This followed the Commission’s latest update, which put the onus on investment managers to set their own definition on what constitutes a sustainable investment under SFDR as long as investments fulfil the three tests of contributing to an environmental or social objective, not causing significant harm to objectives and meeting good governance practices.