Greenwashing has been identified as one of the biggest hurdles for advisers looking to incorporate responsible investment (RI) into their practices.
In a recent webinar hosted by independent investment consulting business Evergreen Consultants, Ethical Invest Group founder Alexandra Brown urged advisers to be cautious.
“Greenwashing is becoming a bit more rampant because there are funds that want to join the bandwagon and add terms like ESG and what have you,” Ms Brown said.
“Underneath the hood, it’s not so ethical or responsible.”
Ms Brown encouraged advisers to look at the underlying holdings and culture of a fund to ensure it has RI front of mind.
It comes after ASIC recently flagged greenwashing as a potential issue and could result in regulatory implications.
“So I feel like it’s a very serious topic, ASIC is taking it seriously and I think as advisers, that’s definitely a big hurdle,” Ms Brown said.
Ethical Investment Advisers’ Karen McLeod agreed with Ms Brown saying that particularly advisers new to the space must be careful.
“Your job there is to act as that gatekeeper… you have to take that job quite seriously,” she said.
“Because there is a lot of puffery, there is a lot of overstated outcomes. In some of the cases with these funds, there’s not a lot of transparency.”
In March, the Responsible Investment Association Australasia (RIAA) released the results of a study which found that knowing about responsible investment is now the top expectation of financial advisers.
Over 1,000 Australians surveyed this year expect their advisers to be knowledgeable about responsible investment, which increased from 54 per cent in 2020 to 64 per cent in 2022.
Around 74 per cent of Australians are considering moving to another provider if they found out their current fund was investing in companies inconsistent with their values.
Yet another example where the product manufacturer can lie, yet it is the advisers responsibility to make sure the claims are correct. How about ASIC actually do their job and make sure the claims being made by manufacturers are correct and punishing them if they are found to be misleading or false.