Refresher – what is greenwashing?
Australian Securities and Investment Commission (ASIC) defines greenwashing as the practice where companies misrepresent the extent to which a ‘financial product or investment strategy is sustainable, environmentally friendly or ethical’.
On 27 October 2022, ASIC took its first action for ‘greenwashing’ against a listed energy company, Tlou Energy Limited (Tlou).
ASIC issued Tlou with four infringement notices in respect of two announcements it made to the ASX which claimed:
- electricity produced by Tlou would be carbon neutral;
- Tlou had environmental approval and the capability to generate certain quantities of electricity from solar power;
- Tlou’s gas-to-power project would be ‘low emissions’; and
- Tlou was equally concerned with producing ‘clean energy’ through the use of renewable sources as it was developing its gas-to-power project.
ASIC contended that Tlou contravened section 12DB(1)(a) of the Australian Securities and Investment Commission Act 2001 (Cth) as it did not have a reasonable basis to make the representations, or that the representations were factually incorrect. For example, ASIC alleged that at the time the representations were made, Tlou did not have environmental approval to construct a solar farm to generate the quantities of electricity from solar power.
As a result, Tlou paid a total of $53,280 in penalties to comply with the infringement notices (however, the payment of the infringement notice is not considered an admission of guilt or liability).
The penalty serves as a reminder that ASIC will be actively monitoring the market for greenwashing and are prepared to take enforcement action for breaches. ASIC has stated that it is currently investigating several listed entities, super funds, and managed funds in relation to their ‘green credentials’ claims.
- ASIC has included corporate greenwashing as one of their enforcement targets over the next 12 months.
- Entities who promote sustainability and green practices must ensure they are able to validate these statements and have a reasonable basis for making representations to current and potential investors.
- Entities may be subject to enforcement action, including Court action, for serious breaches.
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This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.