ACSI submission to Treasury’s second consultation on sustainable investment product labelling.
Summary position
ACSI supports the development of a disclosure framework designed to help retail investors and superannuation members more easily understand and compare investment products marketed as ‘sustainable’ or similar. We encourage Treasury to consider options on how this objective could be achieved by leveraging existing regulatory requirements, which could be an efficient way to improve transparency while mitigating implementation costs and risks.
ACSI welcomes Treasury’s clarification that the proposed regime is not intended to apply to claims made about cross cutting strategies such as ESG integration or investment stewardship. It is essential that investment product issuers and superannuation funds can continue to transparently and accurately disclose approaches to ESG integration and stewardship that often operate across portfolios. For superannuation funds, these strategies play a role in fulfilling their obligations to act in the best financial interests of their members.
Enhancing disclosure expectations
Our preferred model is one that focuses on enhancing transparency and comparability of sustainable investment options rather than placing prescriptive restrictions on product design or investment approaches. This could support consumers to make informed decisions in a diverse and evolving market for sustainable investment products or options, including within the superannuation system. A disclosure-focused approach could work within existing misleading or deceptive conduct provisions which provide a strong expectation that financial products are ‘true to label’.
There is an opportunity for the Government to improve the comparability of information on the features of sustainable investment products by developing a simple, consumer-focused disclosure template or dashboard. Recognising that product issuers are already subject to comprehensive disclosure obligations, ACSI encourages Treasury to explore ways to work within the existing obligations to promote standardised approaches to the transparent presentation of consumer-facing product information through practical regulatory guidance.
A non-exhaustive list of sustainability-related terms, as proposed, could provide clarity on which investment products or options are intended to be in-scope for the disclosure framework. Given the evolving nature of sustainable investment, we feel that this list would be more appropriately part of regulatory guidance rather than legislation.
Thresholds
ACSI is cautious about the proposal to incorporate quantitative thresholds intended to indicate the proportion of an investment productor option aligned with a stated sustainability objective. For diversified investment products that integrate multiple sustainability approaches, thresholds could introduce complexity and may not support practical consumer understanding. If thresholds are considered, we would prefer the approach focus on disclosure of a metric rather than imposing a minimum threshold that could constrain product design and cause confusion for consumers.
Additionally, ACSI does not support the introduction of provisions targeting assets that are deemed to ‘conflict’ with a sustainability objective. Determining which assets may be considered conflicting could introduce uncertainty and existing misleading or deceptive conduct provisions already provide appropriate safeguards in this context.
Please see attached detailed responses to consultation questions.
