In a landmark case for ASIC, the Federal Court has ordered Mercer Superannuation (Australia) Limited to pay a $11.3 million penalty after it admitted it made misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.
ASIC Deputy Chair Sarah Court said, 'This was ASIC’s first greenwashing case brought before the Federal Court; a landmark case both for ASIC and for the financial services industry. It demonstrates the importance of making accurate ESG claims to investors and potential investors.’
The Court found Mercer made misleading statements on its website about seven ‘Sustainable Plus’ investment options offered by the Mercer Super Trust, of which Mercer is the trustee. These statements marketed the Sustainable Plus options as suitable for members who ‘are deeply committed to sustainability’ because they excluded investments in companies involved in carbon intensive fossil fuels like thermal coal. Exclusions were also stated to apply to companies involved in alcohol production and gambling.
The Court found members who took up the Sustainable Plus options had investments in companies involved in industries the website statements said were excluded, such as:
- 15 companies involved in the extraction or sale of carbon intensive fossil fuels (including AGL Energy Ltd, BHP Group Ltd, Glencore PLC and Whitehaven Coal Ltd),
- 15 companies involved in the production of alcohol (including Budweiser Brewing Company APAC Ltd, Carlsberg AS, Heineken Holding NV and Treasury Wine Estates Ltd), and
- 19 companies involved in gambling (including Aristocrat Leisure Limited, Caesar’s Entertainment Inc, Crown Resorts Limited and Tabcorp Holdings Limited).
‘Today’s matter is a strong example to the financial services industry of the greenwashing action we will take. We will continue to monitor the market for ESG-related claims that cannot be validated by evidence to ensure the market is fair and transparent,’ Ms Court added.
When handing down his decision Justice Horan remarked, ‘The contraventions admitted by Mercer are serious. They arose from failures by Mercer to implement adequate systems to ensure that ESG claims in relation to its superannuation products were accurate, and to monitor and enforce the application of any sustainability exclusions associated with such ESG claims.’
Justice Horan also commented: ‘…it is vital that consumers in the financial services industry can have confidence in ESG claims made by providers of financial products and services. As is the case in many other industries, consumers may place great importance on ESG considerations when making investment decisions. Any misrepresentations in relation to ESG policies or practices associated with financial products or services, whether as an aspect of “greenwashing” practices or otherwise, undermines that confidence to the detriment of consumers and the industry generally.’
Mercer Super has agreed to pay ASIC’s costs.
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Background
ASIC has two further cases before the Federal Court concerning greenwashing, with action against Vanguard Investments Australia (23-196MR) and Active Super (23-215MR).
ASIC has issued over $270,000 in infringement notices in response to concerns about alleged greenwashing, which include Tlou Energy Limited (22-294MR), Vanguard Investments Australia (22-336MR), Diversa Trustees Limited (22-379MR), Black Mountain Energy (23-001MR), Future Super (23-110MR) and Morningstar (23-324MR).
Sustainable Plus Investment Options are available to members of the Mercer Super Trust through the ‘Select-your-own’ investment options, which allows members to blend options to suit their needs and are marketed ‘for potential members that are deeply committed to sustainability’, comprise a higher proportion of sustainability-themed assets and are subject to additional investment exclusions of companies in certain sectors.
ASIC’s Information Sheet 271 (INFO 271) provides information for responsible entities of managed funds and super fund trustees about how to avoid greenwashing when offering or promoting sustainability-related or ethical products and investments.
