Sustainable Investment Labels and Greenwashing Risks in Australia

Credit: Guillaume De Germain (Unsplash)

Sustainable investment labels and the law

What businesses need to know before calling something “green”

Who should read this?

If you market products or services using terms like “sustainable”, “ethical”, “green”, “ESG” or “responsible”, this matters to you. This includes business owners, marketing teams, founders, product managers and anyone responsible for branding or compliance.

There is a quiet but significant shift happening in Australia. If your business uses sustainability language in branding or marketing, regulators are increasingly expecting you to prove it.

A proposed Sustainable Investment Product Labelling regime is moving closer to reality. While it is aimed at financial products, the direction of travel is much broader. It reflects a wider regulatory and consumer expectation: if you say something is “green”, “ethical” or “sustainable”, you need to be able to back it up.

And that has real implications not just for compliance, but for your brand.

Why this matters beyond the finance sector.

You might think this only affects super funds or investment products. In reality, it reflects a broader trend that is already playing out across industries.

Regulators like ASIC and the ACCC are increasingly focused on so-called “greenwashing”. That is, businesses making environmental or ethical claims that are exaggerated, vague or not properly supported.

From a legal perspective, this often comes back to the same core rule under Australian law: don’t mislead consumers.

But from a business perspective, it goes deeper. These words are not just claims. They are branding tools.

When you call your product “eco”, “clean”, “natural” or “responsible”, you are shaping how people perceive your business. That perception carries both value and risk.

When branding becomes a legal issue

One of the most interesting aspects of the proposed regime is how it treats certain words as triggers.

If a financial product uses terms like “sustainable”, “green” or “impact”, that alone can bring it within the regime. In other words, the name itself matters.

This is not so different from trade mark and branding principles.

Words like “green” or “ethical” may be attractive from a marketing perspective, but they can be difficult to protect legally because they are descriptive. At the same time, using them can expose your business to scrutiny if the underlying product does not clearly support the claim.

This creates a tension many businesses face:

You want a name that resonates with customers
But the more you promise, the more you need to prove

The 70–80% problem and what it means for you

One of the proposals being considered is whether products labelled as sustainable should meet a minimum threshold. For example, 70–80% of the product’s assets or activities may need to align with the stated sustainability objective.

Even if this exact rule does not apply to your business, the concept is important. Note however that is not law as yet.

Consumers and regulators are increasingly asking:

“How much of this product is actually what you say it is?”

If only a small portion of your product or service aligns with your sustainability messaging, that can create risk. Not just legal risk, but reputational risk.

Think: Evidence

Another key theme is evidence.

The proposed approach in Australia is not overly prescriptive. Instead, businesses would need to rely on “robust and credible” evidence to support their claims.

That might include internal data, third-party certifications, supply chain information or independent verification.

The challenge is that without a strict checklist, businesses need to exercise judgment. And that is where many get it wrong.

It is not enough to believe your product is sustainable. You need to be able to demonstrate it clearly and consistently, across everything from your website to your packaging.

The legalities and your brand strategy

For many businesses, this is not just a compliance issue. It is a branding issue.

Before using sustainability-related terms, it is worth asking:

Can we clearly explain what we mean by this word?
Do we have evidence to support it?
Would a reasonable customer interpret this differently?
Are we consistent across all our marketing channels?

This is where legal and brand strategy need to work together.

A well-chosen brand can build trust and long-term value. But a poorly supported claim can do the opposite.

Practical steps you can take now

It’s often best not to wait for new laws to come into effect.

There are some simple but important steps you can take now.

Start by reviewing your product names, marketing materials and website. Look for any sustainability-related language and consider whether it is clear and supportable.

Then look at your evidence. Do you have documentation or data that backs up your claims? If not, that is a gap worth addressing.

Finally, think about consistency. Regulators do not just look at one statement in isolation. They look at the overall impression your business creates.

Fun facts

Sustainability sells: Consumers are increasingly choosing brands that align with their values, but they are also becoming more sceptical of vague claims.

Words matter: Terms like “green” and “ethical” can trigger regulatory attention, even if they are used informally.

It is not just what you say, but how it is understood: Australian courts look at the overall impression on an ordinary consumer, not what the business intended.

Global trend: Australia is not alone. The UK, EU and US are all moving toward stricter rules around sustainability claims.

What might change?

Until now, businesses have always been required not to mislead or deceive consumers under the Australian Consumer Law, including when making environmental or sustainability claims. In practice, this meant there was flexibility in how claims were expressed, with the focus on the overall impression created and whether it could mislead a reasonable consumer.

This rule itself will stay the same.

That said, regulators seem to be moving toward clearer triggers, more formal disclosures, and stronger expectations around evidence. Simply using terms like “green” or “sustainable” can attract scrutiny, and businesses are increasingly expected to substantiate claims upfront with credible, documented support. In short, it is no longer enough to avoid being misleading. Soon, businesses may need to be able to clearly prove what their claims mean and how they are supported.

For businesses, that means thinking more strategically about the words you use and the promises you make. And if you are not sure about it get legal advice don’t take the risk. In today’s environment, calling something “green” is not just a branding choice. It is a legal one.

Green, Clean… or Just Seen?

Claims to Think Twice About from a legal point of view

Here are some common words, colours and symbols that we find can sometime create risk if they are not properly backed up:

“Eco-friendly”, “green”, “sustainable”
Broad, feel-good terms that often mean different things to different people. If you use them, you need to clearly explain what you actually mean.
“Natural”, “clean”, “non-toxic”
These sound reassuring but can be misleading if the product still contains synthetic or regulated ingredients.
Absolute claims (“100% sustainable”, “zero impact”, “completely biodegradable”)
High-risk. These are very hard to prove and are often where businesses get into trouble.
“Recyclable”, “compostable”, “biodegradable”
These may only apply in specific conditions (for example, industrial composting). If so, that limitation must be clear.
Green or earthy colour palettes
Packaging in greens, browns and “natural” tones can imply environmental benefits — even without words.
Nature-based imagery (leaves, trees, oceans, wildlife)
These visuals can suggest sustainability or environmental credentials, whether intended or not.
Recycling symbols or arrows
Can imply the entire product or packaging is recyclable when that may not be the case.
Badges, ticks or “eco” seals
Especially risky if they look like official certifications but are not backed by a recognised third party.
Vague ESG-style language (“responsible”, “conscious”, “ethical sourcing”)
These need substance behind them — policies, data or real practices — not just branding.

Recycling symbols can be powerful visual cues, but they may also mislead consumers and create legal risk.

Sustainable Investment Labels and the Law