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December 2023 ESG Policy Update-Australia
Wednesday, December 20, 2023


ASIC to Focus on Net Zero Statements and Targets

On 21-22 November 2023, the Australian Securities & Investments Commission (ASIC) hosted the ASIC Annual Forum, outlining:

  • The progress and outcomes ASIC achieved against its 2023 priority areas; and
  • Its key focus areas for 2024.

In her opening speech, ASIC Deputy Chair Sarah Court made some high-level observations, noting ASIC is one of the most active enforcement agencies in Australia and ASIC’s approach to enforcement will be “proactive, strategic and bold”.

With respect to greenwashing, Ms Court noted ASIC’s success in issuing guidance, conducting extensive surveillance and instituting proceedings in the Federal Court against certain superannuation trustees and product issuers with respect to alleged misleading statements about exclusions and screens purported to apply to various investment funds.

Ms Court further stated that going forward, there will be a focus on net zero statements and targets made without a reasonable basis.

Under Australian law, net zero statements and targets will be deemed to be misleading unless the person making the representation had reasonable grounds for making it. The Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) provide that representations as to future matters are taken to be misleading unless they are made on reasonable grounds.

When publishing net zero statements and targets, a company should clearly explain:

  • How and when it expects to meet its target;
  • The metrics used;
  • Any assumptions that have been relied upon;
  • Process for review; and
  • Whether the target or methodology for setting the target has been validated by an independent third party.

Furthermore, directors should ensure that appropriate governance is in place at the board level for signing off the statements and targets and that there is ongoing compliance with any continuous disclosure obligations.

Greenwashing Enforcement Action

On 28 November 2023, the Australian Competition and Consumer Commission (ACCC) announced that it accepted a court-enforceable undertaking from MOO Premium Foods Pty Ltd (MOO), a yoghurt manufacturer, following an investigation into the MOO’s “100% ocean plastic” representations on its yoghurt packaging, website and social media accounts.

Between November 2021 and the date of the undertaking, MOO claimed its yoghurt tubs were made from “100% ocean plastic”. The ACCC considered that the claim gave the impression the tubs were made from plastic waste collected directly from the ocean when instead the plastic resin used in the manufacture of the tubs was collected from coastal areas in Malaysia and not directly from the ocean.

Although MOO included disclaimers on the top and the back of the packaging, the ACCC considered them insufficient to overcome the representation of “100% ocean plastic”.

In the undertaking MOO admitted that the representations likely contravened the Australian Consumer Law, and it has undertaken to remove the representations from its yoghurt packaging, social media accounts and website. Further, MOO has committed to publishing corrective notices on its website and social media accounts, which will remain in place for 60 days.

The ACCC commented this ”is a reminder of the importance for businesses to regularly review any environmental or sustainability claims about their products to ensure they are correct and up to date”.

Proposal to Merge Australian Financial Reporting Bodies

The Australian government has announced its intention to introduce legislation to merge Australia’s three financial reporting bodies: the Australian Accounting Standards Board (AASB), the Auditing and Assurance Standards Board (AUASB), and the Financial Reporting Council (FRC).

Speaking on the proposed restructure, Treasurer Jim Chalmers explained that “business, investors and other stakeholders will benefit from engaging with a single entity, helping to increase regulatory consistency, reduce red tape and unnecessary costs and avoid duplication”.

The merging of the three bodies would end the traditional separation of the auditing and financial reporting architecture in Australia.

At present, the FRC, AASB and AUASB are the three bodies in Australia responsible for setting financial reporting and auditing standards broadly. While we expect the new body will be responsible for administering the climate-related financial disclosure standards, Treasury has confirmed that in the interim, AASB will continue to progress its work in relation to climate-related financial disclosure standards, and the establishment of a framework for sustainability-related financial disclosures remains a key priority for the government.

“The government will finalise the details of the governance arrangements for the new entity and will release draft legislation for public consultation, including appropriate transitional arrangements,” said Chalmers.

If the legislation passes, the newly integrated body would be operational by 1 July 2026.


COP28 in the United Arab Emirates

The 28th annual Conference of the Parties (also known as the 2023 United Nations Climate Change conference) (COP28) was held in Dubai, United Arab Emirates from 30 November 2023 to 12 December 2023. Since COP21 in 2015, discussions at the annual conferences focus on achieving the key objective of limiting temperature increases to no more than 1.5 degrees Celsius above pre-industrial levels by 2030.

Minister of Industry and Advanced Technology for the United Arab Emirates, Dr Sultan al-Jaber, who presided over COP28, noted the focus on:

  • Fast-tracking energy transition and slashing emissions before 2030;
  • Transforming climate finance;
  • Placing nature, people, lives and livelihoods at the heart of climate action; and
  • Mobilising for the most inclusive conference of parties to date.
World Bank Group Boosts Climate Financing to AU$40 Billion

At COP28 on 1 December 2023, the World Bank announced its plans to devote 45% of its annual financing (approximately AU$40 billion) to climate-related projects for the fiscal year 1 July 2024 to 30 June 2025. This exceeds initial expectations by AU$9 billion.

As stated by World Bank President Ajay Banga, resources will be deployed in the bank’s main lending arm, the International Bank for Reconstruction and Development, and its fund for low-income countries, the International Development Association. World Bank projects will focus primarily on the following:

  • Boosting resilience and adaptation among vulnerable nations that have been hit the hardest by the effects of climate change;
  • Safeguarding ecosystems and biodiversity; and
  • Reducing greenhouse gases contributing to climate change.

The World Bank will also implement other strategies to enhance its response to climate change, including:

  • Extending debt repayment pauses to allow vulnerable countries to focus on accessing resources and recovering from climate disasters;
  • Launching a Climate and Health Program to address the escalating negative health impacts of climate change in low- and middle-income countries; and
  • Hosting a loss and damage fund to assist developing countries deal with the effects of climate change.
FCA Releases Sustainability Disclosure Requirements and Investment Labelling Regime

On 28 November 2023, the Financial Conduct Authority (FCA) published the UK’s Sustainability Disclosure Requirements regime, which introduces a package of measures aimed to boost consumer protection and promote trust in the sustainable investment market in the United Kingdom (UK).

Andrew Massey and Philip Morgan from the K&L Gates London office have reported on the key features here. These include:

  • An anti-greenwashing rule—all FCA authorised firms must ensure that sustainability-related claims relating to financial products and services are fair, clear and not misleading. This rule will be effective from 31 May 2024.
  • Sustainability labels—UK-authorised funds and certain UK Alternative Investment Funds may use one of the following four labels: “Sustainability Focus”, “Sustainability Improvers”, “Sustainability Impact” and “Sustainability Mixed Goals” from 31 July 2024 (subject to applicable criteria being satisfied).
  • Rules on the use of sustainability related terms—rules for financial products and services that do not use a sustainability label but still use sustainability-related terms in their marketing materials will be effective from 2 December 2024. These rules will be supplemented by rules applicable to FCA authorised distributors from 31 July 2024.
  • Disclosure and reporting requirements—these requirements will apply to products using a sustainability label or that have sustainability features.

Sacha Sadan, the Director of Environment, Social and Governance at the FCA, stated that these measures have been implemented “so investors can judge whether funds meet their investment needs—this is a crucial step for consumer protection as sustainable investment grows in popularity”.

Nathan Bodlovich and Cathy Ma contributed to this article.

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