ESG Enforcement Tracker

Key facts:

The ASIC launched its first court action for greenwashing, commencing civil penalty proceedings in the Federal Court against Mercer Superannuation (Australia) Limited. Mercer is alleged to have made misleading statements on its website about seven ‘Sustainable Plus’ investment options that it offered as part of its Mercer Super Trust of which it is the trustee.

These investment options were marketed as being suitable for members who “are deeply committed to sustainability” on the basis that they excluded investments in companies involved in carbon-intensive fossil fuels, alcohol production and gambling (among others).

However, the ASIC alleged the ‘Sustainable Plus’ investment options also had investments in companies involved in industries which directly contradicted the website’s claims. These included companies involved in the extraction or sale of carbon intensive fossil fuels, companies involved in the production of alcohol and companies involved in gambling.

In a landmark judgment handed down in August 2024, the Federal Court ordered Mercer to pay a penalty of AUS$11.3 million for misleading statements it made about the sustainable nature and characteristics of certain superannuation investment options. Mercer and ASIC had filed agreed facts and submissions on liability and the penalties to be considered by the court.

The court held that Mercer had made false and misleading representations in that six of the seven ‘Sustainable Plus’ investment options were involved in industries that were said to be excluded, notably investing in, 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),
• the production of alcohol (including Budweiser Brewing Company APAC Ltd, Carlsberg AS, Heineken Holding NV and Treasury Wine Estates Ltd), and
• gambling (including Aristocrat Leisure Limited, Caesar’s Entertainment Inc, Crown Resorts Limited and Tabcorp Holdings Limited).

Citing ASIC v LGSS Pty Ltd, Justice Horan explained that greenwashing has its own definition in respect of financial products, including superannuation and life products, and that is has been identified as a key regulatory and enforcement priority by regulators including ASIC and the Australian Competition and Consumer Commission.

In his conclusions on the penalty to be paid, Justice Horan noted that “[t]he 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” and that “… 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”.