On Friday 2 December, ASIC handed out its second fine for greenwashing. Notably, ASIC's greenwashing fine was not focussed on environmental considerations, but rather the 'S' of ESG: the social dimension.

In particular, ASIC's three infringement notices focussed on a fund that, in ASIC's view, had overstated its exclusion of investing in companies involved in tobacco sales. This is an issue that has been subject to a high degree of scrutiny due to its impact on community health.

Greenwashing is not limited to environmental claims but extends to misleading ethical propositions. Entities which seek to promote ethical investing must ensure their statements are accurate and able to be substantiated.”

ASIC Deputy Chair Sarah Court

Ethical products, services and commitments are now well and truly within the scope of regulatory action.

Companies need to closely examine their social-related representations (on top of their climate-related representations) regarding issues like tobacco, human rights, modern slavery or animal welfare, amongst others.

For Australia, the increasing wave of ESG-related regulatory action poses an opportunity for companies to revisit how they are making – and more importantly, enacting – their ESG-related commitments. Any external representation on ESG plans, progress and performance must be met with commensurate internal policies, processes and procedures to enact those procedures. Otherwise companies risk engaging in misleading and deceptive conduct.

Regulatory action is often a signal for change in the entire system, and must compel organisations to reflect and improve their business practices in order to maintain their social licence to operate. ASIC have clearly signalled to the market that they are prepared to act with the same fervour as their ambitious counterparts overseas – like the U.S.' SEC, the UK's FCA.