Govt moves for green investment truth in labelling | Australian Markets

The Government has again sought to deal with the issue of inconsistent product labelling in the sustainable investment space by way of new session paper issued by Treasury as half of its Sustainable Finance Roadmap.

The session paper makes clear that the Government is concentrating on 2027 for the beginning of sustainable investment product labelling to “help investors identify, compare, and make informed decisions about sustainable investment products”.

It stated sustainable financial product labels might complement the rising info accessible to traders following the implementation of climate-related financial disclosures.

The session paper factors to the truth that a number of surveys have proven that Australian traders are sometimes confused by sustainability terminology citing a Colonial First State (CFS) survey which discovered 58% of Australians don’t know how to match totally different sustainable investment choices.

It stated the introduction of an Australian sustainable investment product labelling framework is meant to assist traders to make knowledgeable choices.

The session paper stated the Government is monitoring sustainable financial product labelling reforms in different jurisdictions notably the US, United Kingdom and the European Union however notes that there’s no common worldwide normal.

“The Government is interested in understanding the benefits of interoperability of Australian labels with those of other jurisdictions. Internationally compatible labelling allows international product issuers to operate efficiently across jurisdictions and facilitates consistency across markets,” it stated.

“However, labels must serve the interests of Australian retail investors, so any international requirements must be meaningful in an Australian context.”

The session paper stated the Government’s dedication to determine constant labels and disclosure necessities extends to investments marketed as ‘sustainable’ or comparable, together with for managed funds within the superannuation system.

“Sustainable financial product labels might apply to a vast spectrum of financial merchandise supplied to retail traders. This paper seeks views on:

• whether or not the kinds of financial merchandise that labels apply to needs to be prescribed or restricted in a way, and
• what phrases needs to be captured by the labelling framework, together with whether or not sure phrases or claims ought to set off product labelling necessities.

Current product naming and advertising practices fluctuate. Terms akin to ‘ethical’, ‘social’ and ‘sustainable’ are utilized by totally different product issuers to broadly point out that the investment product is aiming to attain broader goals past financial returns.

The dialogue paper stated guaranteeing sustainable financial product labels are supported by sturdy proof is significant to making sure the integrity of the labels and has canvassed prescriptive and principals-based approaches, with a leaning in the direction of principals.

“The advantage of a principle-based framework is that it can be applied to the range of investment practices that product issuers adopt. It would also be more responsive to changes in investment and sustainability practices. However, principles alone would not provide certainty for product issuers and significant regulatory guidance would likely be required,” the session paper stated.