On 13 February 2026, the Australian Treasury (Treasury) published a consultation paper on a proposed sustainable investment product labelling regime. Treasury is seeking stakeholder feedback on the design of a framework intended to improve transparency and comparability for financial products marketed as “sustainable” or similar, including for managed funds and within the superannuation system.

Background and policy objective

In the Sustainable Finance Roadmap, the Government committed to developing consistent labels and disclosure requirements for investment products marketed as “sustainable” or similar, with a targeted commencement date of 2027 subject to final policy decisions. The regime aims to address growing concerns that investor expectations are not being matched by the actual investment strategies of product issuers. 

The prohibition against misleading or deceptive conduct in the Corporations Act 2001 (Cth) (the Corporations Act) and the Australian Securities Investments Commission Act 2001 (Cth) have an important role in protecting the market from ‘greenwashing’ practices. However, the Government is aware the lack of consistency between product issuer claims makes it difficult for investors to compare the merits of different sustainable investment options.

Purpose

The proposals in the consultation paper are intended to be a starting point for designing a sustainable investment product labelling regime for Australia. The proposals cover the core elements of the regime: products that qualify as part of the regime; consumer-facing disclosures; criteria that trigger requirements; and the evidentiary requirements to support sustainability claims.

Element 1: Scope of Sustainable Investment Product Labelling – what products will be included?

Treasury proposes that the labelling regime apply to financial products that use “sustainable” or similar terminology in their product title or marketing materials. Treasury proposes that, for example, where a product’s name includes or uses a sustainable or similar term, the product should reflect this objective in its investment portfolio or strategy in a substantive manner. This also includes where the product’s marketing materials feature sustainability or similar terminology as one of the features of the product’s composition or investment strategy.

Treasury’s approach leverages the existing definition of “financial product” in section 763A of the Corporations Act, which captures a diverse range of products available to retail investors. The wide definition would be qualified to products using the term “sustainable” or a similar term that may fall into the ESG umbrella of terminology. This could be in the form of a non-exhaustive list, and Treasury provides an example which includes terms such as “sustainable”, “green”, “climate”, “ethical”, “responsible”, “ESG”, “impact”, “net-zero”, and “socially aware”.

Element 2: Consumer-facing disclosures

Feedback to Treasury’s previous consultation, together with certain international developments, indicate that the introduction of mandatory consumer-facing disclosure requirements could materially improve transparency, credibility and comparability for sustainability-labelled investment products.

Treasury is consulting on three design options:

  • Option 1: Prescriptive template: This would require issuers to present prescribed information in a fixed structure — for example, a standard description of the fund’s sustainability approach (exclusions, screening, impact, transition, stewardship), key metrics such as emissions intensity, explicit sustainability targets and interim milestones, and top holdings with short sustainability descriptors.
  • Option 2: Principles-based template: Issuers would need to ensure consumer-facing disclosures are fair, clear and not misleading, and help consumers understand the product’s sustainability features, but without being bound to a fixed format.
  • Option 3: Hybrid approach: A hybrid model would mandate a small set of core disclosures in a fixed format, such as the fund’s sustainability objective, key sustainability metrics, top holdings, and any explicit targets, to ensure consistency and comparability across products. Beyond this core set, issuers would have discretion to explain their broader sustainability approach using principles-based guidance.

Element 3: Thresholds

Reflecting on international developments, Treasury notes that a common feature of labelling regimes in other jurisdictions is the requirement that a proportion of assets supporting a financial product align with the sustainability objectives of the product.  Taking these developments into account, Treasury believes that there are two broad options for adopting thresholds in the Australian context:

  • option 1: a prescribed minimum threshold (potentially in the 70–80% range, consistent with the United Kingdom (UK) and proposed European Union (EU) frameworks); or
  • option 2: disclosure-only, requiring issuers to disclose the proportion of assets aligned with sustainability claims without mandating a minimum.

A sub-option under consideration would require remaining assets not contributing to the threshold to not conflict with the product’s sustainability objectives, similar to requirements in the UK and EU framework.

Element 4: Evidentiary assessment

Treasury proposes a principles-based evidentiary assessment approach, requiring product issuers to demonstrate that sustainability claims are supported by robust and credible evidence at the point in time at which the claim is made. The proposed approach would provide reporting flexibility and ensure requirements are enduring. Consultation feedback indicated that flexibility in evidentiary requirements would better support product innovation and the development of industry-led best practice codes.

Next steps

The deadline for comments is 13 March 2026. Submissions to the consultation are due via Treasury’s website.

We will be contributing to industry submissions, so please contact us if you wish to discuss any of the issues raised in the consultation paper.