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Australia takes the lead with SRI disclosure law

March 2004

The world’s toughest disclosure requirements on socially responsible investment come into force in Australia this month.

From 11 March, companies providing investment products must declare whether or not they take account of labour standards or environmental, social or ethical considerations. If they do, they must detail how they go about this, including information on methodology and any weighting system used.

The regulation, now supported by final guidelines from the Australian Securities and Investments Commission, goes further than similar disclosure requirements in other countries, where funds have had to state whether they take account of social, environmental and ethical considerations, but not to explain how they do this.

The Australian regulation also applies to a wide range of investment products. In the UK, only pension funds are required to disclose, but the Australian regulation covers any product with an investment component, including pensions, managed funds and life insurance.

The Asic guidelines say product disclosure statements, which provide small-print details about an investment product to consumers, must include information on SRI that ‘a person would reasonably require for the purpose of making a decision, as a retail client, whether to acquire the financial product’.

This includes stating whether fund managers will apply SRI principles by engaging with companies, excluding them from portfolios or selling their shares.

The guidelines say that the more an investment product is marketed on the basis that SRI matters are taken into account, ‘the more detail you have to give about the standards or issues you have regard to and how they are employed’.

The new regime has been brought in by the Australian government’s Corporations Act. Asic has been working on the guidelines, with which companies are required by the law to comply, since December 2002.

The guidelines, which have been welcomed by the Ethical Investment Association of Australia, will be reviewed by Asic in 2006 with a view to ‘further refinement’.




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