Jones commits to YFYS test and plans greenwashing crackdown

Minister for Financial Services, Stephen Jones, has reiterated his support for the superannuation performance test and explained the importance of cracking down on greenwashing. 

Speaking at the Australian Council of Superannuation Investors (ACSI), Jones referenced the government’s recent updated proposals for the Your Future, Your Super performance test.

“We are having a look at the benchmarking exercise that was set up by the previous government, I support it, I support holding trustees to account for the performance of their funds,” Jones said.

“We want to ensure there is an alignment between what we are expecting over the short term, where markets are going over the long term, and we want to ensure there are not unintended consequences or perverse outcomes from the way we are currently measuring fund performance. 

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“I 100 per cent support the introduction of benchmarking and measuring fund performance, that is not in contest but we want to make sure we are doing it in a way that does not have perverse consequences.”

Proposed changes included:

• Prospectively increasing the testing period from eight to 10 years to encourage longer-term investment decisions
• Calibrating key benchmarks to ensure that funds are not unintentionally discouraged from investing in certain assets
• Adjustments to the notification letter that trustees of failed products send to members
• Minor changes to improve accuracy and reduce administrative burden for APRA
• Ensuring the test is fit for purpose when it is extended to trustee-directed products this year

He also referenced the impact of greenwashing and how the government would enforce that, in light of action taken against Mercer Super and Future Super. 

This included $4.3 million to the Australian Securities and Investments Commission (ASIC) to crack down on businesses making misleading claims about the sustainability or efficiency of their products.

“The funding allows ASIC to increase its existing surveillance of suspected greenwashing by listed companies, superannuation funds, and investment managers. ASIC will also be able to pursue larger and more complex matters,” Jones said.

“It will ensure ASIC keeps pace with overseas regulators who are concentrating on greenwashing-related enforcement. This is about ASIC enforcing existing laws, not about introducing new obligations.”

Earlier this week, Future Super, which had approximately $400 million in total funds under management, became the second superannuation fund after Mercer Super to receive an infringement notice over alleged greenwashing. 

Last year, fund manager Vanguard received three infringement notices from the corporate regulator over alleged greenwashing.

Jones added that greenwashing corroded the credibility of financial markets and that not acting in this area was not an option for the Albanese government. 

“My view is that, until we get the taxonomy right, enforcement action by ASIC will only be able to catch out the most egregious examples of greenwashing. That is not the reason to hit the amber light — we should be going after the egregious examples at the same time as we’re putting the work into taxonomy development,” Jones said.

“Investors need a common language and standards to measure what is green and sustainable. We’ve spoken before about the critical role that we see for a taxonomy that aligns with global standards but has an Australian accent. 

“Capital markets can’t work effectively unless there’s transparency and credible information. Australia can’t sit back as new rules on what is green and sustainable are being written offshore without our engagement.”