Australian fund managers have been issued with new guidance on what their regulator expects when it comes to a move towards low emissions investments.
The country’s Financial Services Council (FSC) and its fund management members have announced they are looking to lead the transition to a lower emissions economy following the release of guidelines that will help combat climate change and greenwashing.
“The FSC Guidance demonstrates the funds management industry’s commitment to addressing climate change by setting expectations for the industry when setting net zero targets, labelling investment products, and fulfilling their legal obligation to disclose climate-related risks,” the FSC said in a statement.
The Guidance sets out principles for Australian fund managers to ensure climate-related disclosures to consumers are accurate and “backed by clear evidence”.
The document looks at a range of areas which it believes are key to the ability to change the way in which FSC related companies operate.
It will set net zero targets for investment portfolios, particularly in assessing emissions in portfolios.
It also includes “important considerations when labelling funds to avoid climate greenwashing” and will require companies to report climate risks in line with the Taskforce on Climate Related Financial Disclosures.
CEO of the FSC, Blake Briggs, said the release of the new guidance was part of the country’s strategy to meet the pledges made at COP26 in Glasgow last year.
“The Australian funds management industry takes the challenge of climate change seriously, along with its role in allocating capital to facilitate the transition to a low carbon economy,” he said. “The Glasgow Financial Alliance for Net Zero estimates $4.5 trillion a year from 2026 is required to transition the global economy to net zero by 2050. “Investment funds are playing a vital role in this economic transition by working with their portfolio companies to adopt lower emissions practices.
“The FSC’s Guidance for fund managers is a signal to Government, regulators and consumers the Australian investment community sees acting on climate change risk is a top priority and is taking a leadership position on emissions reduction and meeting net zero targets.”
Briggs concluded: “The FSC wants consumers to have confidence fund managers who set net zero targets are assessing their portfolios with robust science-based methodology and are working with companies they invest in to reduce emissions.”