Ahead of a government consultation on sustainable investment product labels closing tomorrow (29 August), the Responsible Investment Association of Australasia (RIAA) has warned of serious risks.
The region’s largest network of responsible and impact investors says a one-size-fits-all ESG labelling regime could destabilise Australia’s $4.1 trillion superannuation system - and the broader market for responsible investment products - limiting choice for millions of Australians, increasing costs for funds, and raising the risk of greenwashing.
Representing over 500 members managing A$76 trillion / NZ$83 trillion in assets, RIAA is calling for urgent action to ‘set the rules before the money is invested, not clean up afterwards’.
The consultation comes at a pivotal moment, with demand for verified sustainable investment products growing in Australia. Research from RIAA shows nearly 90% of Australians expect their super and other investments to be managed responsibly, and 65% would invest more if their money made a positive impact; 79% would be more inclined to invest in products verified as responsible or ethical by an independent source1.
Estelle Parker, Co-CEO at RIAA, commented: “We’re at a critical moment for responsible investment products in Australia, including our $4.1 trillion superannuation industry. Super is the main way Australians invest, yet super products are inherently complex and diversified. That makes it harder to apply blunt, one-size-fits-all rules.
“If the government adopts an overly prescriptive model as often seen overseas, it will not only fail to meet market demand but also limit consumer choice. We’ve seen overseas regimes stumble, losing trust and momentum. If we don’t account for Australia’s unique and diversified investment landscape, we risk repeating those same mistakes here. For super funds, this could divert capital, create unnecessary compliance costs, and weaken global competitiveness at a time when Australia should be leading in sustainable finance, without actually serving member needs. For consumers, it leaves people with fewer options, higher costs, and less clarity about where their money is invested.”
Why overseas ESG approach doesn’t fit Australia
Overseas, rigid frameworks have created unintended consequences. Many high-quality responsible investment products have been unable to qualify, not because they are low quality, but because the criteria fails to reflect diverse and innovative investment approaches. As a result, some funds have been forced to abandon their labels altogether, leaving investors confused and reducing the range of credible options available to consumers and retail investors.
Australia’s superannuation system is unique. These products are highly diversified, investing across thousands of companies and multiple asset classes to meet their members’ needs. Prescriptive international regimes - like those requiring a fixed percentage of certain assets to meet sustainability criteria - are not designed for such complexity, making them unworkable if directly applied in Australia.
Lou Capparelli, Head of ESG at UniSuper, added:
“We’ve seen in the UK, the bar the FCA sets for the use of the term ‘sustainable’ would, in an Australian context, convert to an impact fund. The hoops you would have to go through to qualify for that would be awfully difficult for many funds to meet. A principles-based approach for sustainable product labelling is a very sensible way of doing things.”
Cost and compliance
For Australia’s superannuation industry, an overly prescriptive approach could also see a cost and compliance burden for fund managers seeking to meet member demand for more sustainable options.
Parker continued: “Overly rigid rules may force investment funds into costly reporting and labelling exercises that don’t reflect portfolio realities, which could translate into higher costs for members. To genuinely protect consumers, product labelling must be designed with super in mind first. But, if the bar for regulation and policy is set too low, the door will be thrown wide open to greenwashing, and will mislead consumers about what they’re really investing in.”
Greenwashing
The warning comes as recent figures show the scale of Australia’s superannuation now sits at A$4.1 trillion in total assets, including nearly A$2.9 trillion in APRA-regulated funds2, meaning missteps, such as greenwashing, won’t just hurt individual funds - they can undermine the entire system’s credibility.
At present, there are no minimum standards for investment funds labelled as ‘socially responsible,’ meaning products can carry this label even if they include industries like weapons or gambling. Consumers need clear information about what the fund means when it claims to be 'social responsible'.
“Australians deserve clarity before they invest - and investment managers need clear expectations so they can create products Australians want to buy. Labelling rules give consumers a simple, trusted way to compare products, prevent greenwashing upfront, and ensure that funds claiming to be sustainable are genuinely meeting those standards.” added Parker. “It’s about setting the rules before the money is invested, not cleaning up afterwards.”
Principles-based framework and certification
In the absence of a regulated product labelling regime, RIAA created the Responsible Investment Certification Program in 2005. The Certification Program now covers over 350 products, and helps funds to navigate the complexities of responsible investing, align with global leading practice, and meet regulatory expectations.
Jessica Cairns, Head of ESG and Sustainability at Alphinity added:
“We’ve been managing a sustainable fund for over 15 years. Over this time, we’ve heard from many of our investors that the sustainable investing landscape can be confusing and hard to navigate. We support the idea of a principles-based fund labelling regime which is practical, and includes categories for different responsible investing approaches. This will drive greater transparency for our investors, mitigate greenwashing practices and support a more robust sustainable investment market in Australia.”
RIAA is urging for the introduction of a principles-based regime that strongly encourages voluntary certification to protect consumers from greenwashing, and support a resilient, credible market for sustainable investments.
Parker concluded:
“We urgently need a robust and credible sustainable investment product labelling regime in Australia. This approach promotes transparency, accountability and accessibility, while giving Australians confidence that funds claiming to be sustainable are genuinely meeting those standards."
“Australians treat super as their most important investment. They deserve clear, trustworthy labelling backed by independent verification to ensure their money is genuinely invested in line with their values. When Australians buy chocolate or bananas, they look for the Fairtrade mark. But what about super?”
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For further information, please contact Ada Tso, Head of Marketing & Communications, RIAA, ada@responsibleinvestment.org, +61481308718
About RIAA (https://responsibleinvestment.org)
With 500+ members representing A$76 trillion / NZ$83 trillion in assets under management, RIAA is the largest and most active network of people and organisations engaged in responsible, ethical and impact investing across Australia and New Zealand. Our membership includes super funds, KiwiSaver providers, fund managers, banks, consultants, researchers, brokers, impact investors, property managers, trusts, foundations, faith-based groups, financial advisers and individuals.
