Australia’s proposed regime for sustainable investment product labels could destabilise its superannuation system, according to the Responsible Investment Association of Australasia (RIAA).
The association, which represents responsible and impact investors worth A$83 trillion (US$ 54 trillion), said a “one-size-fits-all” ESG labelling regime would also limit choice for pensioners, increasing costs for funds, and raising the risk of greenwashing.
The RIAA was responding to a consultation by the Australian Treasury which closed on 29 August.
Estelle Parker, Co-CEO at RIAA, said the proposed approach would be difficult to adopt due to the “inherently complex and diversified” nature of superannuation products.
“If the government adopts an overly prescriptive model as often seen overseas, it will not only fail to meet market demand but also limit consumer choice. We’ve seen overseas regimes stumble, losing trust and momentum. If we don’t account for Australia’s unique and diversified investment landscape, we risk repeating those same mistakes here,” she added.
Parker said the government’s proposed approach could divert capital, create unnecessary compliance costs, and weaken the global competitiveness of supers, while leaving beneficiaries with fewer options and higher costs.
Citing “united consequences” caused by sustainable fund labelling regimes in other jurisdictions, the RIAA said that high-quality investment products provided by superannuation funds ran the risk of falling below standards set by too-rigid frameworks.
“We’ve seen in the UK, the bar the Financial Conduct Authority sets for the use of the term ‘sustainable’ would, in an Australian context, convert to an impact fund. The hoops you would have to go through to qualify for that would be awfully difficult for many funds to meet. A principles-based approach for sustainable product labelling is a very sensible way of doing things,” said Lou Capparelli, Head of ESG at UniSuper.
The Australian Sustainable Finance Institute (ASFI), which is responsible for developing the country’s green taxonomy, said a sustainable fund labelling regime should provides consumers with “clear, comparable information” about sustainable investment products.
