Welcome to the July edition of Herbert Smith Freehills’ Australian ESG bulletin, ‘Keeping Up with ESG’.
Our monthly ESG bulletin provides a targeted snapshot of key developments we see as reflecting the “must know” trends in the Australian market. This month, ASIC and the Ad Standards Board have built upon their greenwashing regulatory enforcement action and the ACCC has published guidance for businesses on making sustainability claims.
Key highlights
- Net Zero Australia releases report, with modelling suggesting $1.5 trillion must be deployed by 2030 to meet Australia’s 2050 net zero target
- ACCC issues draft guidance for business on environmental and sustainability claims
- Ad Standards upholds greenwashing complaint over ‘cleaner’ natural gas ad
- ASIC commences its second greenwashing Court proceedings
- Hydrogen Headstart Program consultations begin
- Climate reporting: ISSB to take over TCFD monitoring, clarifying the “alphabet soup” of ESG reporting
Net Zero Australia releases report, with modelling suggesting $1.5 trillion must be deployed by 2030 to meet Australia’s 2050 net zero target
On 12 July 2023, Net Zero Australia released How to make net zero happen: Mobilisation Report, highlighting priority actions to undertake by 2030 to put Australia on a path to reach net zero by 2050. Herbert Smith Freehills was honoured to be joined by Dr Chris Greig (Princeton University and Net Zero Australia Steering Committee member) at two round tables with clients in July 2023 to discuss the report and hear Dr Greig’s insights into how Australia can make net-zero happen.
The report finds getting Australia to net zero is potentially achievable, but only if 4 critical issues are managed:
Australia’s pathway to net zero will require:
- A significant increase in projects. Current planned and committed projects are well short of committed emissions reduction targets. The modelling suggests $1.5 trillion is needed to be deployed by 2030 to put Australia on target to meet 2050 commitments. To read more on unlocking ESG investment in Australia, see our report at the link below;
- Significant government leadership as well as innovative partnerships between Government and the private sector;
- Hundreds of thousands (yes, hundreds of thousands) of jobs to support the domestic build out. Energy sector employment is modelled to increase to 650,000 FTE jobs across domestic and export energy systems by 2050, increasing from less than 1% to 3-4% of the total workforce by 2060; and
- A new fleet of gas fired peaking plants on the East coast to assist in the transition.
ACCC issues draft guidance for business on environmental and sustainability claims
On 14 July 2023, the ACCC released draft guidance to assist businesses in complying with the Australian Consumer Law when making environmental and sustainability claims (e.g. in marketing, packaging and reporting). The draft guidance provides a clear indication of the ACCC’s views regarding the legality of these types of claims and when the ACCC will be more likely to take enforcement action. The guidance provides 8 practicable principles for businesses when making claims.
The ACCC is seeking feedback, including on industry’s level of confidence in making claims and the ways consumers can better understand and assess businesses’ claims. Consultation closes 15 September 2023.
To read more, see our HSF Note where we examine the guidance’s key risk areas and practical examples:
Ad Standards upholds greenwashing complaint over ‘cleaner’ natural gas ad
On 28 June 2023, the Ad Standards Community Panel published a determination upholding a complaint made against a television campaign that aired in June for the Australian Petroleum Production & Exploration Association (APPEA), which claimed that natural gas was “50 per cent cleaner”. The complaint, made by the Environmental Defenders Office (EDO) on behalf of Comms Declare and Lock the Gate, alleged that the “50 per cent cleaner” claim was misleading, as the advert did not say what Australian natural gas is cleaner than and that the basis for the statement was unclear.
The Ad Standards Community Panel upheld the complaint, including on the basis that the statement was not sufficiently specific or caveated.
The decision follows on from several recent conclusions of the UK Advertising Standards Authority that advertising by a number of oil and gas major was misleading or amounted to greenwashing. To read more see our June edition.
On 21 July 2023, the EDO announced that it had referred APPEA to the ACCC for the statements the subject of the Ad Standards complaint. With This follows on from the ACCC’s recent release of its draft guidance discussed above.
ASIC commences its second greenwashing enforcement proceedings
ASIC’s first proceedings allege a superannuation trustee made misleading and deceptive statements on its website about seven “sustainable” investment options. Now we are seeing ASIC take a similar approach in relation to a responsible entity of managed funds.
On 24 July 2023, ASIC commenced court action in the Federal Court of Australia against Vanguard Investments Australia Ltd, alleging misleading conduct by Vanguard in relation to claims it had made about the ESG-related exclusionary screening applied to investments in a Vanguard fund.
ASIC alleges that Vanguard represented that all securities in the “Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged)” were screened according to certain ESG criteria, to exclude issuers with significant business activities in a range of industries, including involving fossil fuels. Vanguard made statements in its PDS, media releases and interviews with the Finance News Network. ASIC alleges however that Vanguard did not undertake the ESG-related research and screening it had claimed it had in relation to a significant proportion of issuers of bonds in the index, and therefore in the Fund overall. ASIC alleges the Fund was exposed to investments in a number of companies in the oil and gas sector in particular.
ASIC is seeking declarations of misleading and deceptive conduct and civil penalties, as well as orders that Vanguard publicise any contraventions found by the Court to have occurred.
Hydrogen Headstart Program consultations begin
In our June edition, we noted that the Australian government had announced a Hydrogen Headstart Program committing up to $2 billion of government funding to support early hydrogen projects. The government is now inviting stakeholder feedback on the design of the competitive process used to select relevant projects to subsidise under the Hydrogen Headstart Program (in conjunction with consultation on the National Hydrogen Strategy Review). Consultations close 3 August 2023.
ISSB sustainability reporting standards to take over TCFD, clarifying the “alphabet soup” of ESG reporting
On 10 July 2023, the Financial Stability Board (FSB) announced that from 2024, the International Sustainability Standards Board (ISSB) will take over the FSB’s responsibilities in monitoring companies’ progress under the Task Force on Climate-related Financial Disclosures (TCFD) framework. It comes after the release of the ISSB’s global standards for sustainability and climate reporting (IRFS S1 and IFRS S2). Given the ISSB’s standards fully incorporate the recommendations of the TCFD, the FSB and the ISSB consider it appropriate that responsibility for monitoring progress be transferred to the ISSB.
The ISSB standards seek to provide a common language and global baseline for sustainability-related financial disclosures. The ISSB standards provide clarification of the “alphabet soup” of ESG reporting initiatives, through tackling overlapping, inconsistent and competing reporting mechanisms.
Read our insights on the ISSB standards and expected timeframe for implementation into mandatory reporting systems in our updates 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 (Environment, Planning & Communities), Zulema Townsend and Stephanie Hill (Head Office Advisory Team), Tia Liu (Project Finance) and Georgia Gee (Disputes) |
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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.