Govt moves for green investment truth in labelling
The Government has again sought to address the problem of inconsistent product labelling in the sustainable investment space via new consultation paper issued by Treasury as part of its Sustainable Finance Roadmap.
The consultation paper makes clear that the Government is targeting 2027 for the start of sustainable investment product labelling to “help investors identify, compare, and make informed decisions about sustainable investment products”.
It said sustainable financial product labels could complement the increasing information available to investors following the implementation of climate-related financial disclosures.
The consultation paper points to the fact that multiple surveys have shown that Australian investors are often confused by sustainability terminology citing a Colonial First State (CFS) survey which found 58% of Australians don’t know how to compare different sustainable investment options.
It said the introduction of an Australian sustainable investment product labelling framework is intended to support investors to make informed decisions.
The consultation paper said the Government is monitoring sustainable financial product labelling reforms in other jurisdictions particularly the US, United Kingdom and the European Union but notes that there is no common international standard.
“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 said.
“However, labels must serve the interests of Australian retail investors, so any international requirements must be meaningful in an Australian context.”
The consultation paper said the Government’s commitment to establish consistent labels and disclosure requirements extends to investments marketed as ‘sustainable’ or similar, including for managed funds within the superannuation system.
“Sustainable financial product labels could apply to a wide spectrum of financial products offered to retail investors. This paper seeks views on:
- whether the types of financial products that labels apply to should be prescribed or limited in some way, and
- what terms should be captured by the labelling framework, including whether certain terms or claims should trigger product labelling requirements.
Current product naming and marketing practices vary. Terms such as ‘ethical’, ‘social’ and ‘sustainable’ are used by different product issuers to broadly indicate that the investment product is aiming to achieve broader aims beyond financial returns.
The discussion paper said ensuring sustainable financial product labels are supported by robust evidence is vital to ensuring the integrity of the labels and has canvassed prescriptive and principals-based approaches, with a leaning towards 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 consultation paper said.
For more than two decades union super funds have been using misleading and deceptive labelling in relation to “balanced” funds that have far more than 60% growth assets. (Over 90% in some cases).
They also continue to use deliberately deceptive comparisons in relation to commissions, which were banned from all super funds a very long time ago.
These deceptive practices impact millions of people. Yet regulators have chosen to do absolutely nothing about it. Instead they choose to focus on “green labelling”, which impacts far fewer consumers, and is far more subjective.
This is a great example of how biased regulators abuse power to impose their own prejudices on society.