ACSI submission to Treasury’s consultation on options for a sustainable investment product labelling framework.
Summary position
ACSI recognises that many consumers take an interest in sustainable investment but can face challenges in identifying which products align with their goals. We therefore support the development of a targeted labelling regime to help retail investors and superannuation members better understand and compare investment products specifically marketed as ‘sustainable’ or similar. Broader policy objectives, such as attracting investment in the net zero transition, can be more effectively addressed via other mechanisms.
We favour a model which enhances transparency without placing restrictions on the design of products. The labelling regime should leverage existing regulatory frameworks where possible, including the misleading or deceptive conduct provisions in Australia’s existing financial services legislation.
We note that including superannuation products will require consideration of their unique regulatory context, including the BFID. It is important that new requirements do not introduce barriers to the implementation of ESG integration or stewardship by superannuation funds, as these processes contribute strong, long-term financial returns for members.
The design of new requirements
To enhance retail investor understanding, ACSI supports a labelling regime which focuses on transparency. While key investment product features are already disclosed by issuers, there are opportunities to standardise the presentation of key sustainability information to an audience who may not have an in-depth understanding of approaches to sustainable investment. However, product design should remain at the discretion of issuers. This will provide flexibility which allows issuers to pursue a range of sustainability objectives and approaches, supports innovation and allows the regime to remain relevant in an evolving market.
Any new provisions should leverage and build on existing regulatory frameworks where possible. Misleading or deceptive conduct provisions provide a robust obligation for issuers to implement products which are ‘true to label’. Using existing regulatory frameworks supports efficiency and practicality.
To remain consistent with existing regulatory approaches, certification of investment products by a third party should be a voluntary option for issuers rather than a mandatory requirement.
Any new requirements should only apply to investment products which are specifically labelled as ‘sustainable’ or similar. This will address the key policy objective while mitigating unnecessary regulatory costs.
Avoiding disruption of ESG integration and stewardship processes
Regardless of how the labelling regime is implemented, it is vital that funds can continue to transparently and accurately disclose approaches to ESG integration and stewardship. This includes practices employed on a portfolio-wide or asset class basis, including as part of products that may not be specifically marketed as ‘sustainable’. The Government should seek to ensure that superannuation funds can continue to implement investment strategies that are consistent with their BFID obligations, without necessarily triggering new regulatory requirements.
Please see attached detailed responses to consultation questions.
