Australia's Sustainable Investment Product Labelling regime: what product issuers need to know

If your fund markets itself as "ethical", "sustainable" or "green", the Australian Government wants you to prove it – and a new regime to enforce that is now not very far away.

The second Treasury consultation on the proposed Sustainable Investment Product Labelling regime closed on 13 March 2026, and the Treasury's Consultation Paper marks a progression from principles to concrete design choices across four core elements: scope, disclosures, thresholds and evidentiary standards. For product issuers across superannuation, managed investment schemes and ETFs, early preparation is essential.

In this article, we unpack who the proposed regime targets, each of the four design elements, how Australia's approach compares with the UK's, and the practical steps product issuers should be taking now.

Would the Sustainable Investment Product Labelling regime apply to your products?

The regime is designed to apply to financial products marketed as "ethical", "sustainable" or similar to retail investors. It casts a wide net – using the Corporations Act's broad definition of "financial product", which goes well beyond listed funds to potentially capture any product with an investment component.

While most sustainable or similarly-labelled products are currently concentrated in superannuation and managed investment schemes (including exchange traded funds), the consultation acknowledges that other product types – such as term deposits – have also adopted sustainability terminology and could fall within scope. That said, the consultation specifically asks whether the scope should be narrowed to products with an investment component.

For now, product issuers across these segments should be treating this regime as directly relevant to their current and planned product offerings.

The four design elements

Scope: What triggers the regime?

The regime would capture any financial product that uses sustainability or similar terminology in its product title or marketing materials. It would not apply to broad, whole-of-fund ESG integration or stewardship commitments – it targets claims at the product level, including investment options within a broader product.

A non-exhaustive list of trigger terms is proposed, including "ethical", "sustainable", "green", "ESG", "impact", "climate", "net-zero", "responsible", "socially aware and/or conscious", "nature" and "decarbonisation", as well as governance and social terms such as "equity". This mirrors the approach in Singapore and Japan: if a product uses one of these terms in its name, the issuer will be expected to substantiate that.

Disclosures: Template or flexibility?

A mandatory consumer-facing disclosure (CFD) document could be required for any product marketing itself as sustainable or similar. This would be a dedicated, prominent document designed to be clear, comparable and easy for retail investors to understand.

(The acronym "CFD" is already in common use in Australia for “contracts for difference”, and some stakeholders have proposed "investor-facing disclosure" as a less confusing alternative.)

Three design options are proposed:

1. a prescriptive template requiring information in a fixed structure, including the fund's sustainability approach, key metrics, targets and top holdings with sustainability descriptors;

2. a principles-based template where disclosures must be fair, clear and not misleading, but issuers retain flexibility in presentation; and

3. a hybrid model mandating core disclosures in a fixed format while allowing discretion to explain broader strategy using principles-based guidance.

Thresholds: The 70–80% question

The more contested design question is whether a minimum threshold should be prescribed for the proportion of assets aligning with sustainability claims. To put this in concrete terms, for a fund with $500 million in assets, a 70% threshold would mean at least $350 million must demonstrably align with the fund's stated sustainability objective.

The Consultation Paper offers two options:

• Option 1 would require a prescribed minimum threshold, with 70% (consistent with the UK and the proposed EU framework) to 80% (consistent with the US) proposed.

• Option 2 would impose no minimum threshold but require disclosure of the proportion of aligned assets, enabling investor comparison.

Under either option, a sub-option proposes that remaining assets must not conflict with the product's sustainability objectives (as in the UK) or comply with explicit prohibitions on certain asset classes (as in the proposed EU framework).

A prescribed threshold would require ongoing verification, calculation, monitoring and assurance of holdings, and the consultation flags the interaction with the superannuation performance test, which may affect a super fund's ability to comply while meeting targeted returns.

Evidence: How do you prove it?

The Government proposes a principles-based approach to evidence, requiring issuers to demonstrate that sustainability claims are supported by robust and credible evidence at the time the claim is made. Issuers would choose their own types of evidence – whether internal methodologies, third-party data, standards or certifications – provided they meet the robustness threshold.

This reflects stakeholder feedback that avoiding prescription could better incentivise product innovation and accommodate diverse strategies, and would support the development of industry-led best practice codes and verification methodologies over time. However, the trade-off is uncertainty: if there is no prescribed checklist of what constitutes sufficient evidence, and issuers may present evidentiary claims in varied formats, this could increase complexity and potentially reduce information clarity.

How does Australia compare to the UK?

Australia's proposed regime draws on international developments, but the closest comparator is the United Kingdom's Sustainability Disclosure Requirements framework administered by the Financial Conduct Authority.

The UK regime requires 70% of a product's assets to align with its sustainability objective and operates through a system of four product labels:

• "Sustainability Focus" – requiring assets to meet a robust, evidence-based standard of environmental or social sustainability;

• "Sustainability Improvers" – targeting assets with the potential to improve sustainability over time;

• "Sustainability Mixed Goals" –  combining sustainable assets with assets that are improving; and

• "Sustainability Impact" –  focusing on achieving a predefined, positive and measurable contribution to environmental or social outcomes.

The UK has adopted a principles-based approach to evidentiary requirements, mandating that assets be selected with reference to a robust, evidence-based standard that constitutes an absolute measure of social or environmental sustainability, without prescribing the specific types of evidence.

Significantly, the UK's inclusion of a dedicated impact label, and the Australian consultation's recognition of impact investing as a distinct investment approach within its non-exhaustive list of trigger terms, signals a maturing regulatory environment for impact-focused products. This is an important development for the growing number of investors and product issuers with genuine impact strategies.

That said, dedicated regulatory categories for impact investing are a double-edged sword: they validate impact as a credible investment approach, but they also create a new compliance burden for issuers seeking to demonstrate measurable, additional impact outcomes. For clients already operating in or considering impact strategies, the regime will require careful attention to how impact claims are substantiated and disclosed, particularly under a principles-based evidentiary framework.

How does the proposed regime relate to greenwashing?

The Consultation Paper does not suggest that the proposed regime would provide a substitute for greenwashing laws, or a defence against greenwashing claims. The Consultation Paper provides a working definition of greenwashing as "the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable, or ethical".

Product issuers would still need to comply with the applicable laws on misleading and deceptive conduct (for example, in the Australian Consumer Law, the Corporations Act and the Australian Securities and Investments Commission Act). The adoption of a Sustainable Investment Product Labelling regime could lead to confusing and possibly inconsistent requirements for product issuers.

The Consultation Paper acknowledges some of the issues which the regime could raise for greenwashing laws, particularly in relation to the use of thresholds, but stops short of addressing these.

What should you be doing now?

The regime, once finalised, will impose new obligations on any product issuer that uses sustainability or similar terminology in its product name or marketing materials. Early preparation will be critical.

Failure to comply may expose issuers to regulatory enforcement action by ASIC, which has demonstrated an increasingly active enforcement posture on greenwashing claims, including civil penalty proceedings against fund managers for misleading sustainability-related representations.

There are four practical steps that product issuers should be considering now. These broadly align with prudent measures to manage greenwashing risks. However, these steps should be viewed as part of a broader ESG strategy, which should include a strategy for managing greenwashing risks.

1. Audit your product names and marketing materials.

The regime's scope is triggered by the use of sustainability-related terminology. Issuers should audit their existing product names, marketing collateral, websites and other promotional materials against the non-exhaustive list of trigger terms – including "ethical", "sustainable", "green", "ESG", "impact", "responsible", “socially aware and/or conscious” and "climate".

This exercise should also consider whether broader marketing materials feature sustainability terminology, even where the product name itself does not include a trigger term.

This matters because ASIC assesses the totality of representations made to investors and may take action even where the CFD is technically accurate, if the fund's broader marketing creates a misleading overall impression.

2. Familiarise yourself with each disclosure model.

The three design options proposed – prescriptive, principles-based and hybrid – would each impose different operational and compliance demands. Noting the broad support for CFDs during the initial consultation process, issuers should begin familiarising themselves with what a CFD document would look like under each scenario.

The practical tension is real: prescription delivers comparability but may not accommodate diverse strategies, while a principles-based approach supports innovation but risks vague or unhelpful disclosures. For issuers with diverse sustainability strategies across multiple products, the hybrid model may offer the best balance of consistency and flexibility, but this will depend on the final design.

3. Map your portfolio against the 70-80% threshold range.

Whether or not a prescribed minimum threshold is ultimately adopted, issuers should start mapping their portfolios to understand what proportion of assets would currently align with their stated sustainability objectives.

If a threshold in the 70 to 80% range is imposed, issuers will need to know now whether their products can meet that benchmark – and if not, what portfolio adjustments would be required. This analysis should extend beyond the aligned assets to assess the remainder of the portfolio.

Under the sub-option proposed in the consultation, non-aligned assets may need to satisfy a "not conflicting" test or comply with explicit prohibitions on certain asset classes. Ensuring that non-aligned assets do not undermine the product's sustainability claims will be essential to maintaining credibility within the regime.

4. Start building your evidentiary framework now.

Given the Government's preference for a principles-based evidentiary approach, issuers should start considering what evidence they would rely upon to demonstrate that their asset allocation meets the relevant sustainability threshold and that their broader sustainability claims are robust and credible.

This includes reviewing internal methodologies, third-party data sources, standards and certifications currently used to substantiate sustainability-related claims. Without a prescribed checklist, issuers who build clear evidentiary frameworks now will be better placed to demonstrate compliance when the regime takes effect.

Industry-led best practice codes and verification methodologies may also emerge as the regime matures, and issuers should monitor and engage with these developments.