Super funds scold ‘perverse’ Treasury approach

Sustainable investment product labelling should apply only to products marketed as ‘sustainable’ or similar to retail investors, according to big superannuation funds lobby group, the Association of Superannuation Funds of Australia (ASFA).

At the same time, ASFA has pointedly criticised as “perverse” the Treasury discussion paper on Sustainable Investment Product labelling for seeking to impose costs on products not marketed or labelled as “sustainable”.

ASFA has responded to Treasury’s consultation also arguing that any regime should apply at the product level, rather than the fund level.

The organisation said it considered that the regime should not apply to financial products that “do not promote sustainability as a key characteristic/objective, stating that the Treasury consultation’s paper rationale for doing so – to raise the cost base of products not marketed as sustainable, in order to level the playing field – “is perverse”.

“The focus of regime design when considering the cost burden on product issuers should be on regulatory efficiency,” the ASFA response said.

“The notion that products not making sustainability claims should be penalised – for causing harm to the environment and/or society – underplay the intended outworkings of the other elements of the Government’s Sustainable Finance Roadmap,” it said.

“For example, the regimes for climate-related financial disclosure and the sustainable finance taxonomy are expected to lead to better pricing of climate and sustainability risks.”

The ASFA submission also urged the Treasury against taking a legislatively prescriptive approach to investment approaches, arguing that the issue should be left to the industry.

“Generally, the costs of prescribing allowable investment approach would outweigh the benefits,” it said.

ASFA argues that prescribing allowable investment approach could stifle innovation.

“There are risks that product issuers would not be able to use a new, unprescribed investment approach – that did not strictly conform to an existing prescribed approach – until incorporated in legislation,” it said.

“This would tend to limit exploration of new investment approach in the first instance, which could have significant real-world implications. For example, so-called ‘brown to green’ strategies may not conform to explicit categories of investment approach, but can be particularly impact for net-zero transition.”