Australian Court Rules Active Super Misled Members with Greenwashing Claims

A Federal Court in Australia has ruled that Active Super, a $13.5 billion (AUD) superannuation fund, made misleading representations about its environmental, social, and governance (ESG) credentials and investments. The court found that between February 2021 and June 2023, Active Super invested in various securities that contradicted the fund's marketing claims of eliminating or restricting investments posing risks to the environment and community.

Justice O'Callaghan rejected Active Super's arguments that members would distinguish between direct shareholdings and indirect exposures through pooled funds or ETFs. The judge stated ordinary consumers would not draw such a distinction when faced with unequivocal statements like "No way" Active Super would invest in certain sectors.

Despite promoting itself as an ethical fund avoiding gambling, coal mining, Russian companies and oil tar sands, Active Super held investments in firms like SkyCity Entertainment, PointsBet, Whitehaven Coal, ConocoPhillips, Shell, Gazprom and Sberbank during the period examined.

"If a consumer was told there was 'No way' that Active Super would invest in tobacco or gambling, they would not search around for some investment policy that might qualify such statements," Justice O'Callaghan stated in his judgment.

ASIC Deputy Chair Sarah Court hailed the ruling as "a significant outcome" demonstrating the regulator's commitment to cracking down on misleading sustainable investment claims by financial firms.

"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.

The court upheld some of Active Super's representations regarding tobacco packaging and investments in its policy documents. However, the bulk of ASIC's allegations about misleading members on sector exclusions were proven. The matter returns to court for consideration of declaratory relief and potential penalties against Active Super for violating corporate laws prohibiting misleading and deceptive conduct.

The case underscores increasing scrutiny by regulators worldwide over ESG claims and sustainable investing practices amid a proliferation of greenwashing accusations against financial institutions. Industry experts have urged super funds and other investment firms to exercise caution and implement robust processes to substantiate any environmental or ethical marketing statements to comply with legal obligations.

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