Australian watchdog sues super fund for greenwashing over ‘misleading’ exclusion claims

This is the regulator’s third greenwashing-related lawsuit in the space of six months, following its crackdown on misleading ESG claims this year.

The Australian Securities and Investments Commission (ASIC) is suing superannuation fund Active Super, alleging that it exposed its members to investments it claimed to restrict or eliminate through “ESG misrepresentations” on its website, various social media pages and in disclosure documents.

The regulator has accused the A$13.5 billion ($8.8 billion; €8.0 billion) super fund of “misconduct and misrepresentations” to the market, relating to its claims of being an “ethical and responsible” fund.

Active Super allegedly stated on its website that it had eliminated investments that were “too great a risk to the environment and community”, including tobacco manufacturing, oil tar sands and gambling.

However, ASIC claimed that from 1 February 2021 to 30 June this year, Active Super held a total of 28 holdings, either directly or indirectly, which exposed investors to securities the super fund said it restricted.

The holdings include US oil and gas giant ConocoPhillips; Australian coal mining companies Coronado Global Resources, New Hope Corporation and Whitehaven Coal; and Russian state-owned energy giants Gazprom and Rosneft.

The regulator also alleged that, following the start of the war in Ukraine, Active Super said it would stop investments in Russian companies from May 2022, but had holdings in Russian securities as of 30 June this year.

Other holdings included tobacco and gambling companies.

Greenwashing crackdown

In response, Active Super said it has co-operated with ASIC’s investigation and “welcomes increased scrutiny on ESG disclosure standards as being good for members, the super industry and the community”.

It said it could not comment further as the matter is before the courts.

ASIC deputy chair Sarah Court said super funds “must have evidence to back their claims and ensure they are not promising exclusions that they cannot guarantee” when stating that their investment will not be exposed to certain industries.

The financial regulator is seeking declarations, pecuniary penalties, adverse publicity orders and an injunction against Active Super from the court.

The date for the first case management hearing has yet to be scheduled.

The case against Active Super is ASIC’s third greenwashing lawsuit. Mercer Super and Vanguard Investments are also in current proceedings over allegedly misleading sustainability statements.

In November, the regulator announced greenwashing as one of its main enforcement priorities for 2023, saying it would “closely monitor for misleading conduct and claims of greenwashing that cannot be sustained, and take enforcement action where necessary”.

Active Super was one of several super funds to backtrack on their climate commitments earlier this year. The fund removed its 70-page responsible investment report, which outlined how its portfolio was assessed for ESG risk, stating that it had noted ASIC’s updated guidelines and increased focus on ESG disclosure and was consequently “undertaking a process to review its ESG-related materials”.

In June, ASIC chair Joe Longo warned companies not to cease voluntary ESG disclosure by “chasing greenwashing with a little ‘green hushing’” to avoid the regulator’s increased scrutiny.

Since July last year, the financial regulator has secured 23 “corrective disclosure outcomes”, issued 12 infringement notices and started its first civil penalty proceedings with Mercer Super, according to a report published in May.