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Businesses must increasingly prioritise their ESG goals. This article explores recent regulatory and policy updates in relation to sustainable finance, notable developments in sustainability-linked loans and ASIC's enforcement action against greenwashing.


Since Adelaide Airport signed the first Australian sustainability-linked loan (SLL) in 2018, interest in SLLs has steadily risen in the Australian and broader Asia-Pacific region. Borrowers and lenders have used SLLs as a way to align financing terms with their environmental, social and governance (ESG) strategies. However, in the past year, the volume of sustainable debts issued globally, including SLLs, declined for the first time by 19% from the peak of US$1.1 trillion in 2021. Similar trends have been seen in the Asia-Pacific region.

Source: Bloomberg

Despite the decrease in the volume of SLLs in the past year, SLLs remain an attractive financial product, especially given that ESG goals continue to be a key area of focus in Australian boardrooms.

Institutional lenders are also continuing to work towards their targets to increase sustainable financing.  For example, Commonwealth Bank has targeted $70b of funding towards sustainable finance by 2030 and Australia and New Zealand Banking Group with $50b by 2025.

Despite the significant activity in the sustainable finance sector in Australia, regulation has been weak.  Prior to 2023, the Australian Securities and Investment Commission (ASIC) had only issued up to $140,000 in infringement notices in response to concerns about alleged greenwashing. This seems set to change, with greenwashing as one of ASIC’s enforcement priorities in 2023.

Regulatory and policy updates

  • Greenwashing an ASIC enforcement priority for 2023: Greenwashing was announced by ASIC as an enforcement priority in 2023.  ASIC has also released an information sheet in June 2022 entitled ‘How to avoid greenwashing when offering or promoting sustainability related products’ which provides guidance about misrepresenting financial products or investment strategies as environmentally friendly, sustainable or ethical, signalling ASIC’s increased focus on the greenwashing regulation space.
  • First greenwashing action by ASIC: ASIC took its first enforcement action in October 2022 for greenwashing against Tlou Energy Limited for making false or misleading sustainability related statements to the Australian Securities Exchange in October 2021.  Tlou Energy Limited paid a total of $53,280 to comply with four infringement notices.  The first civil court action against greenwashing was brought by ASIC against Mercer (see below) in February 2023.
  • Federal Government’s sustainable financing strategy: On 12 December 2022, the Federal Government announced the development of a comprehensive sustainable finance strategy which will include the development of new standards or taxonomies for sustainable investment, further initiatives to reduce greenwashing and strengthen ESG labelling, and more ambitious participation in global forums to support climate and sustainable finance frameworks and investment.  These principles are consistent with the Australian government’s increasing focus on climate risk disclosures and regulation in the finance space. 
  • Sustainability-linked loan principles: The APLMA, LMA and LSTA released updated versions of the Green Loan Principles, Social Loan Principles, Sustainability-Linked Principles and related guidance in February 2023, reflecting the continuing development of these products in the market.
  • Orange Bond Principles: The Orange Bond Principles were released in October 2022 by the Orange Bond Initiative, which sets out guiding principles for issuers of Orange Bonds.  Orange Bonds (named after the colour of the United Nations Sustainable Development Goal 5: Gender Equality) is a new asset class targeted towards addressing gender inequality. These set of principles will provide valuable guidance for borrowers and lenders wishing to incorporate sustainability performance targets (SPTs) addressing gender inequality in future SLLs.

As SLLs continue to gain traction in Australia, we have seen an increasingly diverse range of SPTs.  While emissions-related SPTs continue to be popular, SPT targets in the wider ESG space have also grown. 

Below is a snapshot of recent significant sustainability-linked loans in Australia, which demonstrate the broader range of SPTs being adopted by borrowers.


Date reported



Sustainability performance targets

Reliance Rail

March 2022



  • Climate Bond Initiative (CBI) meeting its Low Carbon Transport electrified rail criteria (Green-linked target)
  • Reliance Rail meeting four SPTs over a ten-year period, including Reliance Rail’s Infrastructure Sustainability Council Operations Rating, the energy intensity of the Auburn Maintenance Centre and of the trains, solar power photo-voltaic generation at the Auburn Maintenance Centre, and reducing water intensity of operations.

Endeavour Energy

March 2022


Electricity distribution network

  • 40 per cent reduction in CO2e Scope 1 and Scope 2 emissions (excluding line-loss related emissions) by 2030
  • A ‘gateway’ clause tied to reporting on initiatives that either improve line losses or contribute to the decarbonisation of the grid

Pact Group

September 2022



  • Increasing the percentage of recycled content in Pact packaging
  • Increasing the amount of recycled material processed and distributed to the external market
  • Reducing scope 1 and 2 greenhouse gas emissions
  • Gender pay equality

North Queensland Airports

September 2022



  • Reduction of Scope 1 and 2 greenhouse gas emissions to net zero by 2025
  • Measuring and reducing Scope 3 emissions
  • Prioritising procurement from contactors with a defined percentage of Aboriginal or Torres Strait Islander employees
  • Increasing Aboriginal and Torres Strait Islander employees at the airports


November 2022


Mining and infrastructure

  • Reducing Scope 1 and Scope 2 greenhouse gas (GHG) emissions
  • Reducing potable water intensity
  • Increasing representation of women in senior leadership


February 2023



  • Grower engagement with International Sustainability and Carbon Certification (ISCC)
  • Purchasing ISCC-certified Australian-grown grain
  • Securing protein meals for import into Australia and other jurisdictions that are sourced from overseas farms that follow sustainable agricultural practices, including non-deforestation.

ASIC crackdown on greenwashing

In February 2023, ASIC launched its first civil penalty proceedings in the Federal Court for greenwashing against Mercer Superannuation (Australia) Limited (Mercer).  Mercer had allegedly made misleading statements about the sustainable nature of some of its superannuation investment options. 

ASIC alleged that Mercer allowed members to select their own ‘Sustainable Plus Investment options’, which were promoted as an investment strategy that excluded companies involved in fossil fuels, alcohol production and gambling.  However, ASIC alleges that the Sustainable Plus Investment option members had investments in companies said to be excluded for the strategy – for example, ASIC found investments in 15 companies involved in alcohol and 15 companies involved in gambling.

It will be interesting to monitor the outcome of the Mercer case, which may create an important precedent and insight into how the court will evaluate when marketing in respect of sustainable financing becomes misleading or deceptive. The case demonstrates that ASIC is acting on its announcement last year that greenwashing in sustainable financing will be one of its top enforcement priorities this year.


Despite a decline in annual growth in 2022, SLLs will continue to be a significant financial product for companies looking to develop their ESG goals.  The last quarter of 2022 also marked the beginning of ASIC’s increasing enforcement in the area, and it will be more important now than ever for companies engaging in the sustainable finance space to ensure compliance with disclosure requirements in Australia.

Herbert Smith Freehills has extensive experience in the sustainable financing and sustainability linked loan sector in Australia.  We have acted on landmark SLL transactions in Australia such as:

  • Advising Orica on its conversion of $1.3b bank facilities to SLLs in November 2022.
  • Advising Monash University on its $105m SLL in July 2022.
  • Advising ISPT on its $2.8b bank facility restructuring in May 2021, Australia’s largest SLL at the time.
  • Advising eleven lenders, including BNP Paribas, HSBC and Westpac as joint sustainability coordinators, in relation to the refinancing of A$1.4 billion of existing debt facilities, and the inclusion of sustainability linked loan frameworks into those existing facilities, for Treasury Wine Estates Limited.
  • Advising AGL Energy Limited on its $600m syndicated SLL, awarded as the ‘Most Innovative Deal’ at FinanceAsia’s Achievement Awards in 2019 in Australia and New Zealand.

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Australia Project Finance Finance ESG, Sustainability and Responsible Business Deals ESG Jon Evans