‘We asked questions about it’: Small companies warned by regulator of flimsy net-zero claims

Smaller companies preparing to list on the Australian Securities Exchange are having their net-zero credentials questioned by the corporate regulator, which has noticed firms making ambitious climate-change promises without the substance to back them up.

The Australian Securities and Investments Commission has been increasingly focused on greenwashing, as ethical investments and green funds surge in popularity and a change in government has led to a renewed focus on climate change and the transition to net-zero emissions.

ASIC’s Claire LaBouchardiere, who is in charge of oversight of corporate disclosure and governance, told a conference of superannuation trustees and investors last week that the regulator is looking closely at sustainability related financial products to ensure they don’t misrepresent their green credentials.

More and more entities are making public statements about net-zero claims, she said, but she warned their goals must have proper backing and substance.

“Under the law, for any forward-looking statements, you must have a reasonable basis, otherwise the disclosures could be deemed to be misleading. So, you can’t make a purely aspirational statement. You need to have the basis there,” she said.

LaBouchardiere said ASIC was focused on lifting disclosure standards across the superannuation and managed funds sector, which was the impetus behind the release of an information sheet earlier this year which outlined what the regulator is expecting.

However, if the regulator does see egregious conduct, LaBouchardiere said it would consider taking enforcement action. Her team has been reviewing initial public offering prospectuses before companies list on the sharemarket, and have noticed some questionable net-zero commitments.

“We have seen among some of the smaller companies, they have made net-zero commitments and, when we asked questions about it, the statements are more of an aspirational nature or more in the form of a marketing-type statement,” she said.

“So that’s where we have reached out and asked questions and, as a result, they’ve changed their disclosure to either modify statements to be clear about what it actually is or removed it altogether.”