On 2 August 2024, the Federal Court of Australia has ordered Mercer Superannuation (Australia) Limited (Mercer) to pay a $11.3 million penalty after it made misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.
Background
Mercer offers seven different “Sustainable Plus” investment options in the Mercer Super Trust. From 12 November 2021 to 1 March 2023, Mercer had claimed that its Sustainable Plus options excluded investments in companies that derived profits from the production or sale of alcohol, gambling, and extraction or sale of carbon intensive fossil fuels. Despite these claims, six of the seven Sustainable Plus investment options included investments in 15 companies involved in extraction and sale of carbon intensive fossil fuels, 15 companies involved in the production of alcohol and 19 companies involved in gambling. Additionally, Mercer’s investment policies actually permitted each of the Sustainable Plus options to invest in such companies.
On 27 February 2023, the Australian Securities and Investments Commission (ASIC) commenced civil penalty proceedings in the Federal Court against Mercer, alleging that it had made misleading statements about seven Sustainable Plus investment options offered by the Mercer Super Trust. This was in contravention of sections 12DB(a) and 12DF(1) of Australian Securities and Investments Commission Act 2001 (Cth). This marked the first occasion where ASIC had pursued an Australian entity for greenwashing conduct.
Judgement
The Court has found that Mercer made misleading statements about seven Sustainable Plus investment options offered by the Mercer Super Trust. In his judgement, Horan J highlights the seriousness of greenwashing conduct. His Honour commented that ‘it is vital that consumers in the financial services industry can have confidence in environmental, social and corporate governance (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.’
In line with this, Horan J imposed a fine of $11.3 million and ordered that an adverse publicity notice be displayed on Mercer’s website for a period of six months.
What does this mean for your company?
The case highlights the seriousness of greenwashing and serves as a reminder to ensure any ESG claims made by your company is true and accurate. Although this case was the first of its kind, ASIC has since issued over $140,000 in infringement notices for alleged greenwashing conduct, which include Tlou Energy Limited, Vanguard Investments Australia, Diversa Trustees Limited and Black Mountain Energy. Greenwashing has also been identified as a key regulatory and enforcement priority by regulators such as ASIC and the Australian Competition and Consumer Commission, signalling that greenwashing will not be taken lightly.
What should you do?
It is important to ensure that your company does not currently make any false or misleading ESG claims. You should also implement adequate systems to ensure that any ESG claims made remain accurate and to enforce the application of any sustainability exclusions associated with such ESG claims.
More information
If you have any questions or would like further information about this article, please contact:
| Kathryn Speed Principal M: 0408 446 013 E: kspeed@pageseager.com.au |
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| Esther Chai Lawyer T: (03) 6235 5196 E: echai@pageseager.com.au |
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Published: 22 August 2024
