THE Australian government is planning to introduce environmental, social and governance (ESG) labelling requirements, as it seeks to fight greenwashing and steer more capital into credible sustainable activities.
Authorities will establish labels and disclosures for investment products marketed as “sustainable”, including funds run by the superannuation industry, after a public consultation in early 2025, according to a sustainable finance framework released on Wednesday (Jun 19).
The plan also calls for large businesses and financial firms to incorporate climate disclosures based on the Australian Accounting Standards Board’s guidelines, which are due to be finalised in August.
“Disclosure is very important because it forces people to think about and consider what their climate risk exposure is, what are the areas of weakness they have,” said Martijn Wilder, chief executive officer of climate advisory firm Pollination Group. Australian pension funds and other traditional investors are still grappling with what sustainable finance entails, he said in an interview in Singapore.
The government’s plan puts Australia on track to follow Asian financial hubs Singapore and Hong Kong in building ESG requirements. The European Union is the world leader in creating a regulatory framework for ESG, though some of its rules are now under review after a consultation revealed shortcomings.
The Australian government has said it will study “labelling developments” in the United States, the United Kingdom and the EU, and is targeting 2027 for the roll-out of its rules. Its framework entails a number of elements including a taxonomy, as well as best-practice guidelines for companies disclosing transition plans.
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The road map “sets a high benchmark for the Apac region”, said Jean Woo, managing partner of Ashurst’s Singapore unit. “It is detailed, ambitious and sets specific measurable timelines.”
The total size of sustainable funds across Australia and New Zealand was US$30 billion as at end-March, according to Morningstar estimates. BLOOMBERG
