ASIC Gets Third Greenwashing Conviction Against Active Super

Highlights:

• Federal Court Conviction: The Australian Federal Court ruled against Active Super, marking ASIC's third greenwashing conviction, for misleading claims about their ESG investment practices.
• Misleading Claims: Active Super falsely claimed to have excluded investments in industries like gambling, coal mining, and oil tar sands, while still holding these investments directly and indirectly from February 2021 to June 2023.
• ASIC's Message: ASIC Deputy Chair Sarah Court emphasized the ruling's importance in holding companies accountable for accurate marketing of sustainable investment claims, reinforcing ASIC's commitment to combating greenwashing in the financial sector.

Federal Court Ruling

The Australian Federal Court has ruled against Active Super, finding the superannuation fund guilty of greenwashing. The case, initiated by the Australian Securities and Investments Commission (ASIC) last year, marks ASIC's third conviction for greenwashing offenses. The ruling emphasizes the importance of transparency and honesty in marketing environmental, social, and governance (ESG) credentials.

Misleading Claims Uncovered

The court found that LGSS, the trustee for Active Super, misled investors with false claims about its ESG practices. Active Super had previously marketed itself as having eliminated investments in industries posing significant risks to the environment and community, such as gambling, coal mining, and oil tar sands. Additionally, following the invasion of Ukraine, Active Super declared that it had divested from Russian investments.

However, the Federal Court discovered that from February 1, 2021, to June 30, 2023, Active Super continued to hold securities in the very industries it claimed to have excluded. These investments were held both directly and indirectly through managed funds or exchange-traded funds (ETFs). The court rejected Active Super's defense that consumers would distinguish between direct and indirect holdings.

Partial Victory and Specific Findings

While Active Super faced significant setbacks, the court ruled in its favor regarding certain allegations. It was found that the fund did not mislead about its investments in companies producing tobacco packaging. The court also determined that specific claims within its Sustainable and Responsible Investment Policy regarding Russian or oil tar sands investments were not misleading.

Nevertheless, Justice O’Callaghan concluded that Active Super's marketing, which included terms like "not invest," "No Way," and "eliminate," was unequivocally misleading. These terms were not adequately qualified by the fund's broader sustainable investment policy, leading to false impressions about its investment exclusions.

ASIC's Stance and Implications

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

ASIC Deputy Chair Sarah Court praised the ruling, highlighting its significance in promoting accountability for greenwashing. "This decision sends a strong message to companies making sustainable investment claims that they need to reflect their true position," Court stated. This conviction underscores ASIC's dedication to clamping down on deceptive marketing practices in the financial services sector.

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