ASIC deputy chair Sarah Court: ASIC has issued infringement notices totalling more than $270,000 in response to concerns about alleged greenwashing. Photo: ASIC.
The Federal Court has ordered Mercer Superannuation (Australia) to pay an $11.3 million penalty following an ASIC investigation whereby the company admitted to ”greenwashing” its investment options.
According to the Commonwealth’s Clean Energy Regulator (CER), ”greenwashing” is when a company makes itself, its products or its services seem more environmentally friendly, sustainable or ethical than they are. While CER doesn’t have a role in regulating it, the Australian Competition and Consumer Commission (ACCC) and the Australian Securities & Investments Commission (ASIC) are responsible for investigating greenwashing.
In court, ASIC proved that Mercer, as a trustee of its Super Trust, made misleading statements on its website about seven ”Sustainable Plus” investment options that consider environmental, social and governance (ESG) principles.
These statements “falsely” marketed the options as suitable for members who “are deeply committed to sustainability”, because they excluded investments in companies involved with carbon-intensive fossil fuels such as thermal coal. Exclusions were also stated to apply to companies involved in alcohol production and gambling.
ASIC deputy chair Sarah Court noted it as a “landmark case” for the financial services industry as it was the first greenwashing case the agency had brought before the Federal Court.
According to the Federal Court, members who took up Sustainable Plus options had investments in companies involved with industries that were excluded in Mercer’s marketing.
These included 15 companies from the carbon-intensive fossil fuel industry, 15 companies from the alcohol industry, and 19 companies involved in gambling.
Mercer has accepted the court’s decision, including paying its $11.3 million penalty and covering the $200,000 in costs to ASIC throughout the case. The super fund also cooperated with ASIC in undertaking a review of its internal marketing processes and procedures.
“These issues were not intentional and we apologise to our members and clients,” a company statement said. “Members’ funds will not be used to pay the penalty.”
In his judgment, Justice Christopher Horan regarded the transgressions engaged in by senior management officers at Mercer as “serious”.
“The contraventions admitted by Mercer involved more than carelessness, and may be regarded as at least reckless, if not deliberate,” he said.
Justice Horan wrote that Mercer’s failures arose because it neglected to implement systems that ensured ESG claims about its superannuation products were accurate, monitored and enforced.
He noted that due to the “substantial increase” in demand over recent years for investment products with ESG considerations, there was a strong incentive for companies to heavily promote these options to investors and the general public.
“A significant and increasing number of Australian consumers take into account ‘green’ claims and credentials and ESG considerations when making investment decisions, and some are willing to sacrifice returns on their investment in order to pursue an investment strategy that emphasises or prioritises ESG considerations,” he wrote.
“Any misrepresentations in relation to ESG policies or practices associated with financial products or services, whether as an aspect of ‘greenwashing’ practices or otherwise, undermine that confidence to the detriment of consumers and the industry generally.”
Greenwashing is an enforcement priority for the ACCC and ASIC. The latter currently has two other cases before the Federal Court concerning it.
Late last year, the agency brought action against Vanguard Investments Australia and Active Super, for which both judgments were reserved after their respective liability hearings concluded in March.
