ASIC sues Mercer Superannuation in groundbreaking greenwashing case. The regulators are out!!!
Credit: Market Forces
Earlier this month saw the most significant greenwashing action taken to date by regulators in Australia. Australian Securities and Investments Commission (ASIC) launched court action against Mercer Superannuation for greenwashing conduct regarding several of their superannuation investment options.
As you will already know, in recent years, there has been an increasing focus on environmental, social, and governance (ESG) considerations in the investment world. Superannuation funds, which manage billions of dollars on behalf of Australian workers, have been under scrutiny for their claims of "green" or "sustainable" investing practices.
Why is ASIC still cracking down on greenwashing?
ASIC want to ensure consumers are not at risk of being misled – intentionally or unintentionally – by statements or conduct that is misleading or deceptive. And they have been clear that any claims made in relation to sustainable products must be clear, precise and substantiated and have reasonable grounds to ensure they can be delivered upon.
The goal should be to eliminate greenwashing, so that consumers can have trust in the financial industry and make informed investment decisions that are in line with their values and ethics and support sustainability.
Why are you hearing about this now?
ASIC has taken legal action against Mercer Superannuation with $27.5b assets invested for 180,000+ members across a range of investment options.
Mercer allegedly misled members by investing in coal and other fossil fuels, along with alcohol and gambling stocks, in a fund that promoted its sustainable credentials.
“According to ASIC, Mercer’s Sustainable Plus investment option invested in 15 fossil fuel companies, including Whitehaven Coal and BHP; 15 alcohol companies such as Budweiser Brewing and Heineken; and 18 gambling stocks, including Crown Resorts and poker machine maker Aristocrat Leisure.* ”
This was despite Mercer marketing the investment option as suitable for members who are “deeply committed to sustainability” because the fund excluded investments in companies involved in carbon-intensive fossil fuels.
Why stricter scrutiny and regulation is going to benefit you, the consumer, and your financial and sustainable decisions!
ASIC
Has issued more than $140,000 in infringement notices to companies over alleged greenwashing in the past, but had not previously pursued legal action (i.e. Tlou Energy, Vanguard Investments Australia, Diversa Trustees and Black Mountain Energy; and
Is seeking penalties and an injunction against Mercer to stop continuing to put any of the alleged misleading statements on its website.
Court actions are a significant development in the ongoing debate around greenwashing in the superannuation and finance industry.
In the case of superannuation funds, greenwashing can be particularly damaging as it can mislead consumers into believing that their investments are more sustainable than they actually are.
ASIC's actions send a clear message that false and misleading claims about sustainability will not be tolerated as it is important for investors to be able to trust that the claims made by superannuation funds about their sustainability practices are accurate and transparent. The court actions taken by ASIC may lead to greater scrutiny and regulation of the superannuation industry, which could ultimately benefit consumers and the environment.
ASIC has also recently issued interim stop orders on three BT funds for design and distribution obligation (DDO) failings because of non-compliant target market determinations (TMDs).
Up until 17 March 2023, ASIC had issued 27 DDO interim stop orders. Of these, 19 interim stop orders have been lifted following actions taken by the entities to address ASIC’s concerns or where the products were withdrawn, and eight remain in place.**
ACCC^
Will be investigating a number of businesses for potential greenwashing after a recent sweep, and reports that:
More than half of businesses under investigation made concerning claims about their environmental or sustainability practices:
They will engage directly with business to improve compliance with Australian Consumer Law; and
They want to see businesses taking steps to ensure that environmental claims are accurate as well as meaningful for consumers.
Market Forces^^
And a new report by Market Forces finds Australia’s five biggest super funds are greenwashing and exposing themselves to legal risk by failing to effectively engage with companies expanding fossil fuels ie
“ …financial institutions without ‘reasonable grounds’ to believe they will achieve their climate goals could be engaging in misleading and deceptive conduct … which could have serious legal consequences for super funds failing to deliver on their climate commitments.'“
Climate Change litigation^^^
Globally, there are over 2,000 cases of climate change litigation currently underway (as at 31 May 2022).
And while these are mostly in the US, Australia comes in at number 2 with 120+ cases.
And now Big Super Funds are withdrawing questionable ESG credentials info from their websites?!
Reported in the AFR on 26 March 2023, journalist Hannah Wooton said across the nation, funds’ climate change commitments have been mysteriously disappearing from their websites.
“It started with UniSuper’s removal of 16 pages from its climate risk report that estimated the emissions of its various investments.
Active Super went further, removing its entire 70-page Responsible Investment Report showing how its portfolio was assessed for ESG risk.
But the $274 billion AustralianSuper trumped them all, deleting both its climate report and its “Net Zero by 2050” fact sheet from its website, and then made a slew of edits to its “How we invest: Climate change” webpage.
AustralianSuper, UniSuper and Active Super’s website edits also come within days of climate campaign group Market Forces claiming that five major super funds were failing to use their influence over fossil fuel companies they invest in, despite their own ambitious environmental goals.”
Next steps
If you have any questions about your financial situation or moving your money to responsible and ethical investments, call us for a quick chat or drop us a line.
References in this post:
ASIC, “How to avoid greenwashing when offering or promoting sustainability-related products”’June 2022
https://asic.gov.au/regulatory-resources/financial-services/how-to-avoid-greenwashing-when-offering-or-promoting-sustainability-related-products/
*The Guardian, “ASIC sues Mercer Super for allegedly ‘greenwashing’ fossil fuel and gambling investments”, 28 February 2023
https://www.theguardian.com/australia-news/2023/feb/28/asic-sues-mercer-super-superannuation-first-legal-action-alleged-corporate-greenwashing-fossil-fuels-gambling-alcohol
** Money Management ‘Three BT funds receive interim stop orders from ASIC’ 17 March 2023
https://www.moneymanagement.com.au/news/funds-management/three-bt-funds-receive-interim-stop-orders-asic
^ACCC ‘greenwashing’ internet sweep unearths widespread concerning claims
https://www.accc.gov.au/media-release/accc-%E2%80%98greenwashing%E2%80%99-internet-sweep-unearths-widespread-concerning-claims
^^Market Forces Stewards of Climate Disaster 15 March 2023 https://www.marketforces.org.au/campaigns/super/stewards-of-climate-disaster/
^^^Dugald Higgins ( Zenith Investment Partners ) Claiming green credentials can be a risky business - InvestorDaily 15 March 2023
AFR, “Super funds delete climate commitments”, 26 March 2023
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