ASIC outlines new focus in 2023: Greenwashing, cyber resilience, fraud, crypto

The Australian Securities and Investments Commission has released its latest enforcement and regulation report, which highlights actions taken in the last three months of 2022 and outlines the full list of enforcement priorities for the year ahead.

The report provides a clear path forward in relation to ASIC’s upcoming enforcement action, which will mostly be aimed at greenwashing, predatory lending and misleading insurance pricing promises.

The goal remains the same: to protect consumers from financial harm.

Enforcement in sectors including financial services, retail and crypto-assets

ASIC Deputy Chair Sarah Court said: “In the last three months of last year, we initiated a number of significant enforcement and regulatory actions to address misconduct, market integrity threats and consumer harm in sectors including financial services, retail and cryptoassets. This includes corporate governance and directorships, product design and distribution, and misleading statements involving sustainable financial practices.

“We take our role in protecting consumers and investors seriously and will not hesitate to take action to protect consumers where we detect bad behaviour. We will also continue to focus on helping the industry meet its legal obligations, including by providing simple, effective and easily accessible guidance.”

ASIC will dedicate 2023 to enforcement activity targeting sustainable financial practices and the disclosure of climate risk, financial fraud, cyber and operational resilience and investor harm involving crypto-assets.

While this information sheet focuses on sustainability-related products issued by funds, the principles may apply to other entities that offer or market financial products that take sustainability-related considerations into account. Examples include companies listed on a stock exchange or entities that issue green bonds.

Greenwashing raises concerns as companies flock to ESG investments

In relation to investments, “greenwashing” is the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.

Greenwashing distorts relevant information that a current or potential investor may need to make informed investment decisions. It can weaken investors’ confidence in the market for sustainability-related products and pose a threat to a fair and efficient financial system.

There has been an increase in investor demand for, and the availability of, sustainability-related financial products in the Australian market. With this comes an increasing risk of greenwashing and, as a result, of investors being confused or misled.

In 2022, the financial watchdog explained how to avoid greenwashing when offering or promoting sustainability-related products.

“It is therefore important that issuers comply with existing requirements when they market or offer sustainability-related products. Such requirements include prohibitions against misleading and deceptive statements and conduct, as well as disclosure obligations,” the announcement said.

“To help improve the quality of disclosure, ASIC acknowledges the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) and encourages voluntary disclosure that is consistent with the TCFD framework. If you report climate-related information under the TCFD framework, we expect you to be well equipped to transition to any future standard.

“This is an evolving area and there have been significant developments recently in relation to standards for the disclosure of sustainability-related products. For example, in March 2022 the International Sustainability Standards Board published proposed standards for climate-related disclosures and general sustainability-related disclosures.

“You should keep up to date with developments in the regulatory environment and consider how you can improve your disclosures in light of these developments”, ASIC said.