ASIC said it took the case to court to show its commitment to addressing the issue of greenwashing
The Federal Court has determined that Active Super trustee LGSS Pty Limited was misleading in its representations of its ESG credentials.
ASIC Deputy Chair Sarah Court described the judgment as “a significant outcome which shows our commitment to taking on misleading marketing and greenwashing claims made by companies in the financial services industry”.
“ASIC took this case because it sends a strong message to companies making sustainable investment claims that they need to reflect their true position”, Court said.
Active Super’s marketing materials asserted that it excluded investments that posed significant risks to the environment and community, such those related to gambling, coal mining, and oil tar sands. The superannuation fund also indicated that Russian investments were “out” after the Ukraine invasion.
However, the Federal Court found that from 1 February 2021 to 30 June 2023, Active Super held investments in securities it had claimed were excluded or restricted by ESG investment screens. The superannuation fund held these securities both directly and indirectly through managed funds or ETFs.
On 5 June, Justice O’Callaghan ruled that Active Super publicised representations on its website, reports, and disclosure documents that were misleading and deceptive regarding the exclusions for investments in gambling, coal mining, Russian entities, and oil tar sands. When the representations were made, Active Super held direct and indirect investments in companies like:
- SkyCity Entertainment Group Ltd and Pointsbet Holdings Ltd (gambling)
- Gazprom PJSC and Sberbank of Russia (Russian entities)
- ConocoPhillips and Shell Plc (oil tar sands)
- Whitehaven Coal Limited and Coronado Global Resources (coal mining)
In the judgment, O’Callaghan said that terms such as "not invest," "No Way," and "eliminate" were unequivocal and not the subject of possible qualifications by LGSS’s Sustainable and Responsible Investment Policy.
“I am unable to accept LGSS’s contention that an ordinary and reasonable member of the relevant class would draw a distinction between holding shares in a company and indirect exposures through pooled funds”, Justice O’Callaghan said in a statement published by ASIC. “It seems to me that such a consumer would not draw that distinction, including in particular because there is nothing in the Impact Reports or on the LGSS website that suggests that the claims that there was, for example, ‘No way’ Active Super would invest members funds in gambling, tobacco and so on, was to be read subject to a proviso that there was a way in which it would do exactly that, by investing indirectly, not directly. In my view, that distinction is one which no ordinary reasonable consumer would draw.”
He pointed out that if a consumer was informed that it was impossible for LGSS to invest in tobacco or gambling, “he or she would not search around for some investment policy that might qualify such statements. Absent some indicator on the face it, such as a footnote or asterisk with some accompanying statement that the apparently unqualified language was, in fact, something that was subject to qualifications or limitations, they would have no reason to”.
Nonetheless, the court concluded that Active Super was not misleading in its representations regarding holdings in companies that contributed to producing packaging for tobacco products. Moreover, specific representations in its Sustainable and Responsible Investment Policy concerning Russian or oil tar sands investments were not deceptive.
A further hearing has been scheduled in which the court will decide the appropriate form of declaratory relief. The court will later determine the pecuniary penalty for the conduct.
Last year, ASIC brought its first greenwashing court action against an Australian entity in Mercer Superannuation (Australia) Limited.
