Momentum behind ASIC’s crackdown on greenwashing has continued to build. The regulator has recently highlighted that greenwashing continues to be a particular focus in its oversight of capital raisings.
In its December Corporate Finance Update, ASIC provided general guidance on what it considers issuers should provide in the context of capital raisings:
- clear and supportable reasons to justify why they consider their products or services to be ‘clean’ or ‘green’. These reasons should be disclosed in proximate locations so investors can identify and understand the basis for any claims; and
- reasonable grounds for any statement that is forward-looking in nature, including net zero targets, and disclosure of those grounds. Investors should be provided with information about what your target is, how and when you expect to meet your target, how you will measure your progress or milestones, and any underlying assumptions.
ASIC noted its concerns in the capital raising space have been more common among issuers involved in the mining and energy industries, and that is has taken actions which resulted in, for example, an oil and gas issuer removing net zero emissions targets where it did not provide additional information about how the targets would be achieved, and the potential feasibility of them.
The regulator has again flagged that when making any green or sustainability claims, issuers should consider the principles set out in Information Sheet 271, How to avoid greenwashing when offering or promoting sustainability-related products.
For a breakdown of ASIC’s guidance on how to avoid greenwashing and the questions companies should ask themselves in this regard, see our previous focus piece, ‘Greenwashing: ASIC’s guidance on how to avoid it’.
The rising focus in the Australian market on environment, social and governance (ESG) issues, including greenwashing, is finding its way into more acquisitions and investment decisions. Investors are increasingly using ESG as one of their investment criteria, and an effective integrated ESG risk and governance model has the potential to significantly enhance value for fundraisers, and target businesses in M&A more broadly.
This article was written with the assistance of Grace Baty, Law Graduate.