The Australian Securities and Investments Commission (ASIC) released a discussion paper seeking stakeholders’ views on whether it should issue guidelines on the new socially responsible investing (SRI) disclosure requirements for products with an investment component (investment products) and, if so, what these guidelines should contain.
The issue arises as a result of recent reforms to the Corporations Act requiring investment products to disclose in their product disclosure statements (PDS), the extent to which labour standards or environmental, social or ethical considerations are taken into account in the selection, retention or realisation of the investment. These reforms also give ASIC the power to make guidelines about such disclosure.
‘The main arguments in favour of guidelines are to provide consumers with better disclosure to enhance their ability to ensure that the products they purchase match any SRI goals they may have and to provide industry with greater certainty about how it can meet this new disclosure obligation’, said ASIC’s Deputy Executive Director of Consumer Protection, Ms Delia Rickard
In developing the paper, ASIC consulted with over 20 industry, government and community sector organisations. ASIC staff also attended a number of forums dealing with SRI issues. The content of the paper addresses the issues raised in those early consultations.
‘ASIC does not intend to tell product issuers what labour standards or environmental, social or ethical considerations they should look at. Nor will ASIC be telling SRI funds what methodology they should use.
‘Rather, we are saying that while it is up to product issuers to determine what they have regard to, and how they make their assessments, they must ensure that consumers are aware of their approach.
‘Product issuers should tell consumers whether or not there are specific standards and considerations they take account of (and if there are, what those are), and whether or not they have a methodology for doing so (and if they do, what it is).
‘All investment products will need to address SRI issues in their PDS to some extent. The more a product promotes itself as taking into account labour standards and environmental, social or ethical considerations, the more detailed the PDS disclosure will need to be’, Ms Rickard said.
The paper also argues that where an investment product claims to take into account labour standards and environmental, social and ethical considerations, the disclosure must cover its approach to monitoring the ongoing compatibility of its investments with its stated strategy, and what it will do when an investment no longer fits its disclosed SRI approach.
‘The diversity of investment products on the market and the broad spectrum of SRI approaches mean that while guidelines may be helpful, it won’t be possible to set down definitive rules about what to say and when’, Ms Rickard said.
ASIC recommends that product issuers always ask themselves:
Is there anything they are saying (or not saying) that is likely to give rise to a misleading or deceptive impression about the SRI characteristics of their product?
Are they providing their target consumers with sufficient information to allow them to clearly understand the product issuers approach to SRI issues, and to determine whether or not it meets any SRI goals consumers may have?
Submissions on the discussion paper are due by Friday 28 February 2003.