ASIC Secures Landmark $7.4 Million Penalty Against Mercer in First Greenwashing Case

In a victory for the Australian Securities and Investments Commission (ASIC), the Federal Court has imposed a $11.3 million ($7.4 million USD) penalty on Mercer Superannuation (Australia) Limited for misleading statements regarding the sustainability of its superannuation investment options. This ruling marks a pivotal moment as it is the first greenwashing case brought before the court by ASIC, setting a precedent for the financial services industry in Australia.

The Federal Court found that Mercer, the trustee of the Mercer Super Trust, made misleading claims on its website about the sustainability credentials of seven “Sustainable Plus” investment options. These options were marketed as ideal for investors "deeply committed to sustainability," with assurances that they excluded investments in companies associated with carbon-intensive fossil fuels, alcohol production, and gambling.

However, it was revealed that members who chose the Sustainable Plus options were, in fact, invested in several companies that contradicted these sustainability claims. Specifically, the Court identified:

• 15 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.
• 15 companies involved in the production of alcohol, such as Budweiser Brewing Company APAC Ltd, Carlsberg AS, Heineken Holding NV, and Treasury Wine Estates Ltd.
• 19 companies involved in gambling, including Aristocrat Leisure Limited, Caesar’s Entertainment Inc, Crown Resorts Limited, and Tabcorp Holdings Limited.

The ruling handed down by Justice Horan emphasized the severity of Mercer’s violations. He noted that the contraventions arose from Mercer’s failure to implement adequate systems to ensure the accuracy of its ESG claims and to monitor and enforce the exclusions it had promised. In his remarks, Justice Horan underscored the importance of consumer trust in ESG claims, stating:

"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."

ASIC’s Ongoing Crackdown on Greenwashing

This case represents a significant milestone in ASIC’s broader campaign against greenwashing—a term used to describe the act of making false or misleading claims about the environmental benefits of a product, service, or company. ASIC Deputy Chair Sarah Court highlighted the importance of this ruling, stating:

"This was ASIC’s first greenwashing case brought before the Federal Court; a landmark case both for ASIC and for the financial services industry. It demonstrates the importance of making accurate ESG claims to investors and potential investors."

Ms. Court added that this decision serves as a strong warning to the financial services industry about the consequences of unsubstantiated ESG claims. ASIC has made it clear that it will continue to monitor the market and take action against ESG-related claims that cannot be backed by evidence, ensuring that the market remains fair and transparent.

Broader Implications and Future Actions

The penalty against Mercer is not an isolated incident but part of ASIC’s intensified focus on holding companies accountable for their ESG claims. ASIC currently has two additional greenwashing cases pending before the Federal Court—against Vanguard Investments Australia and Active Super. These cases, along with several others where ASIC has issued infringement notices totaling over $270,000, reflect the regulator's commitment to combating greenwashing across the financial services sector.

In light of these developments, ASIC has also released Information Sheet 271 (INFO 271), which provides guidance for responsible entities of managed funds and superannuation fund trustees on how to avoid greenwashing when promoting sustainability-related or ethical products and investments.

The Federal Court's decision in the Mercer case marks a watershed moment for ESG accountability in Australia’s financial services industry. As ASIC continues to pursue greenwashing cases, this ruling sets a clear expectation for companies to ensure that their ESG claims are not only ambitious but also accurate and verifiable. For consumers and investors, this landmark case underscores the importance of due diligence when considering sustainable investment options, reinforcing the need for transparency and integrity in the burgeoning ESG landscape.

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