What’s in a name?
If done right, Australia’s financial product labelling regime will help avoid greenwashing and channel capital to more sustainable outcomes. But it must be principles-based and be anchored in widely accepted industry standards.
RIAA’s research shows that 88% of Australians expect their super or other investments to be invested responsibly and ethically, and 65% of Australians would be motivated to invest more if they could be sure their investments were making a positive impact in the world. More and more Australians are seeking out investment options that deliver sustainability outcomes. They increasingly understand the positive difference that re-allocating even a small amount of the $4.8 trillion worth of managed funds in Australia could make for their future and their children’s future.
But they don’t trust what their bank or their fund is telling them. 78% of Australians are concerned about greenwashing in the finance sector. Australians who say they’re more likely to invest in a super fund that was certified by an independent body has risen from 47% in 2013 to 79% in 2024.
To help protect consumers and retails investors against greenwashing as the number of ‘sustainable’ financial products on the market grows, the Australian Treasury’s Sustainable Finance Roadmap June 2024 listed the development of a sustainable investment product labelling regime as a priority: “The Government has committed to establish consistent labels and disclosure requirements for investment products marketed as ‘sustainable’ or similar, including for managed funds and within the superannuation system. Such a regime will support product issuers as well as retail investors and consumers, given the increasing demand for investment products with specific sustainability objectives.”
Treasury is commencing work to develop a new regime and will closely consider:
- Existing industry approaches to sustainable investment product marketing in Australia.
- Interactions with new sustainable finance frameworks, such as the taxonomy, and broader climate and sustainability activities like emissions reduction targets.
- Key labelling developments in other markets, particularly in the United States, United Kingdom, and the European Union.
RIAA is the leading expert and standard setter on sustainable financial product labelling in Australasia, with deep expertise developed over RIAA’s 24+ years in existence. As a Not-for-Profit organisation, almost 19 years ago, RIAA acted in the absence of a legislated regime to establish the Responsible Investment Certification Program, with the aim of improving the products which are offered to consumers and retail investors and raising industry standards. There are now some 340 financial products certified.
RIAA’s Responsible Investment Standard against which products are assessed covers aspects of portfolio construction which are wider than product labelling (such as Avoid Significant Harm criteria); however, a sub-set of the Standard is strong requirements around product labelling, as articulated in RIAA’s Product Labelling Guidance Note.
RIAA’s Responsible Investment Standard maps well to expectations of regulators in Australia and New Zealand, as well as developments globally. RIAA and its Certification Program keep up to date with international developments, and the Certification Program’s criteria remain relevant and reflect industry leading practice*.
The product labelling component of the Responsible Investment Standard is principles-based, rather than prescriptive. Reflecting international norms and regulator signalling, RIAA has produced specific prescriptive guidance in relation to funds trading with the word ‘sustainable’ in the label, funds trading with the term ‘Impact’ in the label (and prominent in marketing material), and funds claiming a climate change benefit. These Guidance Notes provide clarity of the criteria RIAA’s Certification Program will use when assessing whether or not such funds are true-to-label.
The development of, and additions/amendments to, the Responsible Investment Standard are conducted under strong governance arrangements and stakeholder consultations, including the involvement of an industry Technical Expert Groups. The Certification Program’s strong governance framework also includes approval by a Certification Assessment Panel of experts independent to the analysts, verification by a qualified independent third party, and spot checks of holdings against claims made for all products.
Adhering to RIAA’s Standard has encouraged numerous product issuers to significantly improve their product design, disclosures and marketing in order to gain certification, which in turn improves the products provided to consumers and retail investors and reduces instances of greenwashing.
Requiring funds to adhere to minimum standards, aligned with reasonable consumer expectations, and clarifying how terms such as “sustainable”, “ethical” and “impact” can be used would be a significant step forward for our market. As would obliging non-sustainable funds to disclose negative exposures or adverse impacts, which would illuminate for ordinary Australians with superannuation accounts or other investment portfolios, where their money is going. This in turn would ensure there is not an outsized regulatory burden on those trying to do good.
If the Government’s new labels and disclosure requirements for investment products marketed as ‘sustainable’ or similar use the Responsible Investment Standard from RIAA’s Certification Program as the basis for the regime’s product labelling criteria, this would ensure industry acceptance, and rapid adoption and support to allow retail investors and consumers to have clarity over their investment products.
Through its 24-year history, RIAA has supported funds that are trying to make a difference to be even better, and help everyday Australians move their money into investments that support a healthy and sustainable environment, society and economy. These funds must be supported through a clear, transparent labelling system that will help avoid confusion and greenwashing, and ensure Australians can have confidence in the finance sector’s sustainability claims.
*While we rely heavily on international classifications and labelling systems we make no representation that our classifications meet the requirements of other regimes.
Estelle Parker, Co-CEO, Responsible Investment Association Australasia (RIAA)
With a distinguished 20-year career at the Department of Foreign Affairs and Trade, Estelle Parker brings crucial expertise in government relations, policy-making, and themes important to responsible investors, including human rights and the SDGs. As a leader driving RIAA’s research, certification, policy, standards, and working group programs, her leadership has elevated these initiatives to achieve heightened levels of professionalism, impact, and value delivery for our members, aligning seamlessly with RIAA’s strategic objectives.
Beyond her organisational impact, Estelle is a respected figure in the responsible investment landscape, serving as a strong advocate on influential global and government committees, including the Principles for Responsible Investment’s Global Policy Reference Group, the Global Sustainable Investment Alliance and the Australian Government’s Natural Capital Working Group. Additionally, she serves as the Convenor of the Taskforce on Nature-Related Financial Disclosures official Consultation Group for Australia and Aotearoa New Zealand, and the Steering Committee for the Australian Sustainable Finance Institute. She is also a member of the Council of the Australian Institute for International Affairs (Victoria).
Disclaimer: The above content is provided by Responsible Investment Association Australasia (ACN 641 046 666, AFSL 554110) for information purposes and is not an offer to buy or sell a financial product, and is not warranted to be correct, complete or accurate. For more information refer to our Financial Services Guide on the RIAA website. Any general advice has been provided without reference to your investment objectives, financial situation or needs. If the advice relates to the acquisition of a particular financial product for which an offer document (such as a product disclosure document) is available, you should obtain the offer document relating to the particular financial product and consider it before making any decision whether to acquire the product. Past performance does not necessarily indicate a financial products’ future performance. To obtain information tailored to your situation, contact a financial adviser.