The Australian Securities and Investment Commission (ASIC) announced it has commenced legal proceedings in the Federal Court of Australia against Mercer Superannuation (Australia) Limited ACN 004 717 533 (Mercer) alleging ‘greenwashing’. ASIC alleges Mercer made misleading statements of the sustainable nature of some of their investment options. The proceedings commenced in the Victorian Registry of the Federal Court of Australia on 27 February 2023.
What is greenwashing?
Greenwashing is regulated by both the Australian Competition and Consumer Commission (ACCC) and ASIC. The ACCC’s compliance priorities align with consumer and fair trading issues associated to the misleading representations in relation to goods or services. ASIC’s compliance priorities align with whether the representations made were in connection to the supply or possible supply of financial services. ASIC’s Chair, Mr Joe Longo, has defined greenwashing as:
“The potential for an entity to overrepresent the extent to which its practices are environmentally friendly, sustainable, or ethical”.
Mercers alleged contraventions
It is alleged by ASIC that Mercer promoted the ‘Sustainable Plus Investment Options’ offered by the Mercer Super Trust, of which Mercer is the trustee. Mercer claimed the investment options were appropriate for members that were committed to sustainability.
In statements made by Mercer, the investment options allegedly excluded companies involved in carbon intensive fossil fuels, alcohol production and gambling. Some companies listed as Sustainable Plus Investment Options include, BHP Group Ltd, AGL Energy Ltd, Heineken Holding NV, Treasury Wine Estates Ltd Crown Resorts Limited and Tabcorp Holdings Limited.
ASIC argues, “Mercer made false and misleading statements and engaged in conduct that could mislead the public”, as despite Mercers statements:
- BHP Group Ltd and AGL Energy Ltd are involved in the extraction or sale of carbon intensive fossil fuels;
- Heineken Holding NV and Treasury Wine Estates Ltd are involved in the production of alcohol; and
- Crown Resorts Limited and Tabcorp Holdings Limited are involved in gambling.
It is alleged that Mercer has contravened the following sections of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act):
Section 12DB(1)(a) of the ASIC Act provides that:
- “A person must not, in trade or commerce, in connection with the supply or possible supply of financial services, or in connection with the promotion by any means of the supply or use of financial services:
make a false or misleading representation that services are of a particular standard, quality, value or grade”.
Section 12DF(1) of the ASIC Act provides that:
- “A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any financial services”.
Prior enforcement action by ASIC
ASIC’s power in relation to superannuation trustee conduct was enhanced following the legislative amendments arising from the Financial Services Royal Commission. Reforms to the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth) allowed the regulator to act against false or misleading statements and deceptive conduct regarding financial products and services under the Corporations Act 2001 (Cth) (Corporations Act) and the ASIC Act.
While this is the first greenwashing proceeding brought by ASIC, it has previously issued over $140,000 in infringement notices for greenwashing conduct. The most notable infringement notices included:
- Diversa Trustees Limited;
- Tlou Energy Limited; and
- Black Mountain Energy.
To learn more about the infringement notice issued to Black Mountain Energy see previous article Greenwashing – Infringement notices to Black Mountain Energy Ltd.
ASIC and ACCC prioritise greenwashing enforcement action
In regard to the current proceedings, ASIC Deputy Chair, Sarah Court stated:
“This is the first time ASIC has taken an Australian entity to Court regarding alleged greenwashing conduct, and it reflects our continuing efforts to ensure sustainability-related claims made by financial institutions are accurate“.
With a growing community awareness of sustainability related investment options, there is an increased risk of greenwashing. ASIC’s Corporate Plan 2022–26: Focus 2022–26 outlines how greenwashing will be a top priority moving forward – stating Sustainable Finance Practices is a core strategic project.
The ACCC reiterated their continued focus on greenwashing conduct in the regulators 2023-2024 Enforcement and Compliance Priorities. The number one priority being ‘consumer, product safety, fair trading and competition concerns in relation to environmental claims and sustainability’.
What does this mean for businesses?
ASIC has demonstrated its increasing focus on investigating a number of businesses that may be engaging in greenwashing conduct. In response to the recent enforcement of infringement notices and Court action, businesses must be vigilant of their current approach to sustainability and Environmental, Social and Governance (ESG) objectives.
Every company’s sustainability endeavour must comply with the Corporations Act, ASIC Act and ACL to avoid similar scrutiny from regulators. ASIC provides a Guidance on how to avoid greenwashing for entities of managed funds and super fund trustees in Information Sheet 271 (INFO 271).
Links and further references
Legislation
Australian Securities and Investments Commission Act 2001 (Cth)
Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth)
Cases
ASIC – Originating Process (Notice of Filing and Hearing)
ASIC – Concise Statement (Notice of Filing)
ASIC – Information Sheet 271 (INFO 271)
Further information about greenwashing
If you need advice to ensure that your business is making compliant statements about its green credentials and ESG objectives, contact us for a confidential and obligation-free discussion:
Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au
Disclaimer
This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.
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