Australia Court Fines Active Super A$10.5 Million for Greenwashing ESG Investing Claims

A federal court in Australia imposed a A$10.5 million (USD$6.7 million) penalty on superannuation fund Active Super trustee LGSS, after finding that the firm had engaged in greenwashing by continuing to invest in securities in areas that it had claimed to eliminate for environmental or social reasons.

The ruling follows the filing of a suit in 2023 by Australia’s corporate, markets, and financial services regulator, the Australian Securities & Investments Commission (ASIC), arguing that from 2021 through 2023 Active Super invested in securities that it had claimed to have eliminated or restricted by ESG investment screens, in areas including gambling, coal mining and oil tar sands, as well as Russian investments following a restriction added after the invasion of Ukraine.

In its suit, ASIC listed 28 holdings by Active Super which exposed members to these areas, such as holdings in casino operator Skycity Entertainment Group, tobacco company Amcor, and Russian oil and gas companies Gazprom and Rosneft.

In a judgement issued in June 2024, Justice O’Callaghan found that the Active Super trustee contravened the law by making misleading ESG investing representations to its members on several of the counts presented by ASIC.

In the new penalty ruling Justice O’Callaghan said that there “was no dispute” that the breaches by LGSS “were serious,” adding:

“LGSS benefitted from its misleading conduct by misrepresenting the “ethical” nature of a significant part of its investments, which on any view enhanced its ability to attract investors to the Active Super fund and enhanced its reputation as a provider of investment funds with ESG characteristics. As a result, investors lost the opportunity to invest in accordance with their investment values.”

O’Callaghan did note, however, that “LGSS apologised (albeit belatedly),” and that it has taken action to address the greenwashing conduct, including steps to improve its compliance system.

The ruling marks the latest in a series of greenwashing fines against asset managers in Australia, including a A$12.9 million penalty against Vanguard Investments Australia, and an A$11.3 million penalty against Mercer Superannuation in 2024.

In a statement following the ruling, ASIC Deputy Chair Sarah Court said:

“This case demonstrates ASIC’s commitment to taking on misleading marketing and greenwashing claims made by companies promoting financial services. It is our third greenwashing court outcome, and we will continue to keep greenwashing in our sights.”

Source: esgtoday.com