Sustainability for asset managers: Australian considerations

Abstract Australia has a highly developed liability regime for asset managers who make misstatements in connection with the solicitation of investments. Misstatements or other misleading conduct in relation to environmental, social, and governance related matters, including climate disclosure risks, or claims of ‘green’ investment characteristics, may attract liability. Cases of this kind are likely to increase. The Australian Government is committed to reaching ‘net zero’ carbon emissions by 2050. Investor appetite for investments with ‘green’ or social or ethical credentials is strong and growing, and the temptation to misrepresent such attributes is high. Enforcement action to stamp out this conduct is considered a priority and has already met with success. Australia’s new mandatory climate reporting regime will apply to larger managed funds and superannuation funds. This measure is likely to give rise to an increase in the instance of asset managers facing allegations of misstatement or other wrongful conduct. Careful judgment will be necessary to avoid not only overstating environmental credentials, but also understating risks to the fund and, arguably, failing to act in accordance with the interests of the manager’s clients by misjudging the relevance of environmental concerns.