Socially Responsible Investment: Labour Standards and Environmental, Social and Ethical Disclosures within the SRI Industry

Socially responsible investment (SRI) requires that investors are informed of the extent to which investment products comply with ethical investment guidelines. Under the Australian regulatory framework relating to investment products, Section 1013D of the Corporations Act 2001 requires that product disclosure statements (PDSs) include information about whether SRI matters have been considered in an assessment of an investment product. The Australian Securities and Investment Commission (ASIC) was given the mandate to develop legally binding disclosure 'Guidelines' under Section 1013DA. The Guidelines require disclosure as to how labour standards or social, environmental or ethical considerations are taken into account in selecting, retaining or realising an investment. This paper provides an examination of disclosure practices by the Australian SRI industry contained in PDSs through a descriptive study to determine the level of compliance. The analysis of the PDS disclosures revealed that fund managers emphasised the description of selection strategies; however, the level of compliance of other disclosure requirements varied among the statements reviewed. As these Guidelines are unique to Australia and are an important piece of legislation, this study is timely and partly fills a gap in the research in this area.