Welcome to Herbert Smith Freehills’ Australian ESG bulletin, ‘Keeping Up with ESG in Australia’.
Given the breadth of developments in relation to ESG, we have reformulated and relaunched our ESG bulletin to provide a targeted snapshot of key developments we see as reflecting the “must know” trends in the Australian market. In this edition, we spotlight greenwashing, including the new Senate inquiry and activist strategy.
Key highlights
- In the spotlight: Senate inquiry into Greenwashing established, Greenwashing action heats up
- Sustainable finance: Updated guidelines and principles for sustainable financing products released; ASFI releases the final recommendations report on the development of an Australian sustainable finance taxonomy
- The Workplace Gender Equality Agency will soon be required to publish gender pay gap information
- Biodiversity: Nature Repair Market Bill introduced into Parliament
- Safeguard Mechanism reforms progress
In the spotlight: Senate inquiry into Greenwashing established, Greenwashing action heats up
Already in 2023 there have been significant developments in the greenwashing space. Developments are being driven from different angles, including by the Senate, the major business regulators ACCC and ASIC, and by climate activists.
On 29 March 2023 the Federal Senate agreed to establish an inquiry into greenwashing by Australian corporations. The terms of reference include investigating the environmental and sustainability claims made by companies, the impacts of greenwashing claims on consumers and legislative options to protect consumers from greenwashing. Industries in focus will include energy, vehicles, household products and appliances, food and drink packaging, cosmetics, clothing and footwear industries. The closing date for submissions is 8 June 2023, with the report due by 5 December 2023.
The inquiry follows the 2 March 2023 ACCC announcement that it would be investigating several businesses for greenwashing. This follows the ACCC’s ‘internet sweep’ undertaken last year of around 250 businesses’ websites. ACCC identified over half (57%) made concerning claims about their environmental credentials. The findings of the sweep will also inform the ACCC’s forthcoming guidance on improving integrity of environmental claims.
On 28 February 2023, ASIC announced it had filed is first claim alleging greenwashing in the Federal Court, against Mercer Superannuation (Australia) Limited for allegedly making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options. This follows ASIC’s issue of various greenwashing infringement notices against four companies in late 2022 and early 2023, and shows ASIC is willing to litigate to enforce greenwashing rules. Media reports suggest that ASIC is further ramping up its greenwashing enforcement this year and suspects that additional matters will result in court action.
We are also seeing the continuation of a trend of activist groups making complaints to regulators alleging greenwashing, seeking to trigger regulator investigation and associated enforcement action (rather than bring court action themselves). Recent examples include complaints made to the ACCC about Etihad Airways (regarding its net zero and sustainability claims) and Toyota (regarding claims about the environmental performance of vehicles and its net zero ambitions), a complaint made to the ACCC and ASIC against Tamboran Resources (regarding its statements about the impact of changes to the Safeguard Mechanism), and a complaint made to ASIC against ANZ (regarding its representations about a climate-related shareholder resolution at its 2022 AGM). Underlining the increased focus on alleged greenwashing, we have also seen the Australian Government’s Climate Active certification scheme be the subject of a complaint made to the ACCC.
Sustainable finance developments
Updated guidelines and principles for sustainable financing products
In March 2023, loan market trade associations LMA, LSTA and APLMA launched updated Sustainability Linked Loan Principles, Green Loan Principles and Social Loan Principles. The updated principles provide refreshed non-binding guidance to stakeholders looking to engage in these respective sustainable financing products around the world. Significantly, throughout the updates it appears that there is an expectation that existing sustainable finance products purporting to comply with these guidelines may need to be reviewed to ensure they remain consistent with the updated principles.
ASFI releases final recommendations report on the development of an Australian sustainable finance taxonomy
On 27 March 2023, the Australian Sustainable Finance Institute (ASFI) released its final taxonomy recommendations report, compiling the results of public consultation on the development of an Australian sustainable finance taxonomy. The report indicated broad consensus between key stakeholders that scientific credibility should underpin the development of the taxonomy while ensuring it is usable.
The release of the report symbolises another checkpoint in progressing the development of a sustainable finance taxonomy in Australia, which is intended to be used as a tool to facilitate the credible and transparent identification of, and investment into, sustainable activities. Federal Treasurer Jim Chalmers indicated in late 2022 that it is important that Australia develop its own sustainable finance taxonomy, given how critical it is to a credible sustainable finance agenda.
The Workplace Gender Equality Agency will soon be required to publish gender pay gap information
On 11 April 2023, the Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Act 2023 (the WGEA Amendment Act) received royal assent. The WGEA Amendment Act amends the Workplace Gender Equality Act 2012 (Cth) (the WGEA Act) to require the Workplace Gender Equality Agency (WGEA) to publish gender pay gap information of each ‘relevant employer’ (which includes all employers with 100 or more employees in Australia) for each reporting period.
Until now, the WGEA has collected gender pay gap data from employers, but has not had the legislative authority to publish it. Instead, employers received this information in a confidential report. The WGEA Amendment Act actions Recommendation 2 from the 2021 Review of the Workplace Gender Equality Act, and aligns with the Government’s 2022 election commitment to close the gender pay gap at work including by boosting pay gap transparency.
These amendments provide a useful reminder for employers to:
- assess, and establish ways to improve, any potential gender pay gaps in their own businesses; and
- consider the information they are providing to WGEA as part of their annual reporting obligations under the WGEA Act, as this information will form the basis for WGEA’s reporting.
Biodiversity: Nature Repair Market Bill introduced to Parliament
On 29 March 2023, the Nature Repair Market Bill 2023 and the Nature Repair Market (Consequential Amendments) Bill 2023 were introduced into the Commonwealth Parliament. The proposed Bills will enable landholders to voluntarily participate in 'biodiversity projects' that enhance or protect biodiversity in native species to generate biodiversity certificates. This will create a national market of tradeable biodiversity certificates. The Senate has now referred the provisions to the Environment and Communications Legislation Committee for inquiry and report. Public submissions are invited until 1 June 2023 and can be made here.
For more information see our blog post below.
Safeguard Mechanism reforms progress
On 30 March 2023, the Australian Parliament passed the Safeguard Mechanism (Crediting) Amendment Bill 2023 . The Safeguard Mechanism (Crediting) Amendment Bill 2023 received royal assent on 11 April 2023. The Bill was primarily introduced to enable the crediting element of the reform, however the changes negotiated with the Australian Greens Party are not limited to crediting and will extend beyond amendments to the Bill itself. The Act:
- sets a “hard cap” on CO2e emissions from safeguard facilities between 2020 to 2023 and requires net safeguard emissions to decline to net-zero by end of FY2049;
- provides new flexible compliance measures to provide emissions-intensive businesses with options to comply with the Safeguard Mechanism requirements, including the introduction of safeguard mechanism credit units; and
- provides tailored compliance options for Safeguard facilities determined to be ‘emissions-intensive, trade-exposed’.
To read more in preparation for the reforms anticipated to take effect from 1 July 2023, please see our blog post below.
ESG thought leadership
To read more of our ESG thought leadership, please see:
- The Third Wheel Podcast Series: ESG in Australia
- ESG Notes and Climate Change Notes,
- ESG, Sustainability and Responsible Business offering
- Unlocking ESG Investment in Australia
| Written with assistance of Paige Mortimer and Shi-Mei Ewing (Environment, Planning & Communities), Georgia Roy (Disputes), Marin Zubonja and Darcy Moffat (Employment, Industrial Relations & Safety) and Tia Liu (Project Finance) |
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Disclaimer
The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.