Australia's current financial services regulatory & compliance landscape is changing rapidly - Clyde & Co's weekly Regulatory Roundup will ensure you are up to date with the most important changes. In each edition, we will set out five key developments from the past week for you to consider. 

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  1. ASIC v Vanguard Investments Australia Ltd [2024] FCA 308: in ASIC’s first major greenwashing win, the Federal Court of Australia has found that Vanguard contravened the ASIC Act by making false or misleading representations and engaging in conduct that was liable to mislead the public in relation to a fund titled and described as “ethically conscious”. While the extent of penalties or adverse publicity orders are yet to be determined, this decision is an important milestone in ASIC’s anti-greenwashing agenda and likely to inform its enforcement approach going forward. There are two other ASIC greenwashing investigations that are currently underway which relate to the same substantive issues. All financial services companies should be looking to ensure that any ESG-related claims can be fully substantiated.
  2. Mandatory climate reporting legislation: the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth), introducing Australia’s new mandatory climate-related financial disclosure regime into the Corporations Act, has been introduced to Parliament. The commencement date in the Bill has been pushed out to 1 January 2025 for larger organisations and there will be a phased implementation for other organisations. The proposed legislation will require reporting entities to disclose their climate-related plans and risks in accordance with Australian Sustainability Reporting Standards. Disclosures under the regime will be subject to the existing liability provisions under the Corporations Act (including as regards misleading and deceptive conduct). 
  3. Quality of Advice legislation: the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024 (Cth) was also tabled in the House of Representatives last week. This is the first tranche of quality of advice legislation designed to implement some of the recommendations in the Quality of Advice Review and includes simplified rules for conflicted remuneration and a streamlined process for the delivery of financial advice, along with greater flexibility in how FSGs are provided. As a major error has been identified in the Bill, with exemptions for insurance broker commissions inadvertently removed, it is likely that we will see another version of the amending Bill in the near future! 
  4. APRA to survey climate risk: APRA has announced that it will survey regulated entities for parity between their current approaches to considering and managing the financial risks of climate change and the expectations set out in APRA’s Prudential Practice Guide 229 as part of its focus on climate risk as one of the six cross-sector priority areas announced in January. In addition to providing insights into the management of financial risks arising from climate change, the survey is intended to “improve both APRA’s and industry’s understanding of the approaches being taken by APRA-regulated entities to identify, assess and manage climate-related financial risks” and support the incorporation of climate-related risks into APRA’s supervisory arrangements in future. It will be interesting for the industry as a whole to see the outcome of the survey, particularly from a benchmarking and comparability perspective. Watch this space!
  5. International perspective: close to home in New Zealand, risks related to climate change are also in the regulator’s sights with the Reserve Bank of New Zealand issuing draft guidance to support financial institutions implement better practices to identify, manage and monitor climate-related exposures. While voluntary and non-binding, entities should expect the guidance to inform RBNZ’s supervisory approach going forward. And as the guidance is expressly stated to be based on APRA’s Prudential Practice Guide 229, the market can expect RBNZ to be closely watching developments in Australia in this sector. The draft guidance also makes it very clear that the role of senior management will be a fundamental component of climate-related risk mitigation strategies going forward. 

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