Investments promising social or environmental benefits need tougher anti-greenwashing rules

Getty Images Investment funds increasingly promise to deliver social or environmental benefits alongside financial returns.

Regulators rightly ask if these “impact investment” claims are accurate.

But we also need to ask what happens when an investment’s promised impact fails to materialise, or when pursuing it causes unintended harm.

This regulatory blind spot has practical consequences.

Claimed or promised social or environmental impacts influence where people put their retirement savings.

They also influence where governments, foundations and institutional investors direct capital.

The risk of greenwashing – where an investment is presented as more sustainable or socially responsible than it really is – needs to be carefully monitored.

Australia’s enforcement regime shows the importance of scrutinising these kinds of claims.

Last month, a court ordered Fiducian Investment Management Services to pay A$7.3 million in penalties over a fund promoted as ethical and socially responsible.

The court found the fund had invested via other related funds that held companies earning revenue from fossil fuels.

The court also found Fiducian failed to adequately monitor whether these investments were consistent with the fund’s stated objectives.

This followed earlier court-imposed penalties of $11.3 million against Mercer Superannuation and $12.9 million against Vanguard Investments Australia for misleading statements about sustainability made in their investment offerings.

New Zealand is also strengthening expectations.

Financial Markets Authority guidance issued in May 2026 says investment funds’ sustainability-related claims should be “clear”, “substantiated” and “consistent”.