ASIC gets third greenwashing conviction

The Australian Federal Court has ruled that superannuation fund Active Super committed greenwashing in a case brought before the court’s last year by the Australian Securities and Investment Commission.

Tuesday, June 11th 2024, 5:05AM

by Andrea Malcolm

Last week, the Federal Court found that LGSS, as Active Super’s trustee, broke the law with misleading claims concerning environmental, social and governance (ESG) credentials.

In its marketing Active Super (formerly known as Local Government Super) said it had eliminated investments that posed too great a risk to the environment and the community, including gambling, coal mining and oil tar sands. Following the invasion of Ukraine, Active Super also claimed that Russian investments were “out”.

However, the Federal Court found that from 1 February 2021 to 30 June 2023, Active Super invested in various securities it had claimed were excluded or restricted by ESG investment screens. These securities were held by Active Super both directly and indirectly, via managed funds or ETFs.

The judge rejected Active Super’s argument that an ordinary or reasonable consumer would draw a distinction between holding shares in a company and indirect exposures through a pooled fund.

Tobacco packaging OK

In Active Super’s favour, the court found that the superannuation fund didn’t engage in misleading representations in relation to its holdings in companies involved in making packaging used for tobacco products, and that specific representations in its Sustainable and Responsible Investment Policy were not misleading with respect to Russian or oil tar sands investments (although the remaining representations alleged by ASIC were upheld).

However Justice O’Callaghan found that Active Super did publish representations which were misleading and deceptive in relation to exclusions for gambling, coal mining, Russian entities and oil tar sands investments on its website, reports and disclosure documents.

He found that the use of terms such as ‘not invest’, ‘No Way’ and ‘eliminate’ were unequivocal and weren’t qualified by the LGSS’s sustainable and responsible investment policy.

In his judgement, he said, “If such a consumer was told, as they were told, that there was “No way” that LGSS would invest in tobacco or gambling, he or she would not search around for some investment policy that might qualify such statements.”

At the time of publishing the statements, Active Super held direct and indirect investments in SkyCity Entertainment and Pointsbet Holdings (gambling), Gazprom PJSC and Sberbank of Russia (Russian entities), ConocoPhillips and Shell Plc (oil tar sands), and Whitehaven Coal and Coronado Global Resources (coal mining).

ASIC deputy chair Sarah Court said the decision was a significant outcome showing ASIC’s commitment to taking on misleading marketing and greenwashing claims by companies in the financial services industry.

“ASIC took this case because it sends a strong message to companies making sustainable investment claims that they need to reflect their true position,” she said.

Tags: ASIC