In the midst of a surge in sustainable investing, ambiguity surrounding ESG labels is causing confusion among investors in Australia's $3.5 trillion superannuation industry.
According to Jonathan Armitage, chief investment officer at Colonial First State, less than a third of Australians understand ESG investment options.
Armitage highlighted a lack of "consistency around terminologies, methodologies and, taxonomies," suggesting that this is central to the prevailing confusion.
A survey by Colonial First State revealed that less than 6% of 1,400 Australians understood ESG and sustainable investing.
Measures against greenwashing
Regulatory bodies like the Australian Securities and Investments Commission (ASIC) are taking measures against 'greenwashing'—the practice of misleadingly promoting environmental credentials.
Karen Chester, ASIC's deputy chair, advocates for a climate change-related disclosure regime meeting international standards.
The Australian government has initiated consultations on developing a climate risk disclosure framework. About 87% of submissions support a climate-related financial risk disclosure (CRFD) framework, according to treasurer Jim Chalmers.
Amid these developments, Armitage predicts a rise in demand for ESG-related funds over the next five years. He further stated that although his company prohibits investments in sectors like tobacco and thermal coal, it does not plan to expand fossil fuel exclusions.
Armitage believes such exclusions could be counterintuitive to the process of energy transition.