Australia: Regulatory update – 17 October 2022

By Jim Bulling and Hugo Chow

ASFI releases its first report on the Australian sustainable finance taxonomy

The Australia Sustainability Finance Institute (ASFI) is working closely with the government and regulators to develop an Australian sustainable finance taxonomy.

The Report outlines the key considerations that will inform the development of an Australian sustainable finance taxonomy that will consist of credible, science-based definitions.

The key findings of the Report include:

• Many jurisdictions are seeking to use taxonomies to facilitate an appropriate transition to a sustainable economy;
• There is a need for guidance to allocate capital to credible transition activities both in Australia and globally; and
• International interoperability is key and can be achieved whilst ensuring the taxonomy takes into account Australia’s own circumstances.

ASFI will release its second report outlining its key recommendations for the Australian sustainable finance taxonomy in December 2022.

APRA flags concerns over fund sustainability

APRA’s Margaret Cole told the House of Representatives’ Economics Committee last week that the regulator is concerned about some of the super funds that passed the performance test yet failed the regulator’s own sustainability testing.

“There are some [trustees of super funds] that don’t look like they will have a longer-term sustainable future”, said APRA’s Margaret Cole.

“We will continue, even where there aren’t fails, to nudge some of those that we see probably don’t have sustainability to consider the options for the future and how their members could be better served’, Ms Cole told the Committee.

ASIC is upping the ante on greenwashing, sets sights on super

Appearing at the House of Representatives’ Standing Committee on Economics last week, ASIC deputy chair Sarah Court said that ASIC are looking at potential misleading or deceptive conduct by various listed entities, super fund trustees and managed fund responsible entities.

In particular, ASIC are looking at claims about wanting to achieve net zero emissions by a particular time, claims about carbon neutrality, emissions-reduction strategies and other areas including claims about investment exclusions or screening processes applicable to sustainability-related financial products.

Ms Court said that organisations that made these claims need to show evidence and ensure they have practices, systems and procedures in place to back them up.

Calls for individual fines in Financial Accountability Regime

Consumer groups have asked the Senate committee assessing the Financial Accountability Regime (FAR) bill to reconsider the former government’s decision to remove large fines for individual bankers who breach the regime. They argue that by removing personal liability, senior bankers will not be deterred from engaging in misconduct.

When FAR was originally proposed by Treasury in 2020, it included provisions to hold individual bankers accountable through civil penalties of over $1 million. However, the draft FAR legislation released in July last year did not include the fines for individual bankers, and personal accountability in the FAR will be limited to ancillary / accessorial liability.

The Australian Banking Association says the lack of individual fines is appropriate given FAR provides APRA with strong powers to disqualify an ‘accountable person’ from the industry.