ASIC monitoring Santos court action over greenwashing claims

The corporate regulator says it is ‘monitoring’ legal action brought against Santos by climate-focused shareholder advocates as part of its action against misleading environmental disclosures.

The Santos Moomba gas plant. ACCR alleges the company is misleading investors about its plan to achieve net-zero emissions by 2040, with Santos increasing its natural gas operations instead. Picture: Simon Cross

The corporate regulator says it is “monitoring” legal action brought against Santos by climate-focused shareholder advocates as part of its action against misleading environmental disclosures.

In an internal memo prepared by the Australian Securities & Investments Commission, officials note their interest in the legal proceedings are part of the agency’s work on sustainable finance.

“Currently, (the) Office of Enforcement has a number of greenwashing investigations on foot, involving potential misleading or deceptive conduct breaches by various listed entities, super fund trustees and a managed fund responsible entity,” the memo, prepared in September for use by the regulators’ staff at parliamentary hearings, reads.

The document also notes most of these investigations are at an “early stage” and relate to suspected misleading statements on net-zero targets, emissions reduction goals and whether companies are providing the screening on sustainable finance products.

“ASIC is monitoring the greenwashing case brought by the Australasian Centre for Corporate Responsibility … regarding representations that Santos’ natural gas product is ‘clean fuel’ and that Santos has a credible and clear plan to reach net-zero emissions by 2040,” it reads. Further commentary about the proceedings have been redacted.

The ACCR, which presses listed companies to accelerate their emissions reduction plans and to be clearer about their sustainability efforts, filed against Santos in August 2021, alleging its description of natural gas as a “clean fuel” was a misrepresentation.

The ACCR also alleges the company is misleading investors about its plan to achieve net-zero emissions by 2040, with Santos increasing its natural gas operations instead. The group claims Santos’ net-zero pathway depends on an undisclosed assumption about the effectiveness of carbon capture and storage.

Santos chief executive Kevin Gallagher.

The matter is due before Federal Court judge Michael Lee next month before hearings start later in the year. The ACCR’s executive director, Brynn O’Brien, told The Australian that companies – “especially major listed emitters” – needed a credible plan to deliver their net-zero commitments.

“Investors rely on these company commitments in order to make serious decisions about the allocation of capital, including about how the retirement savings of Australian workers are invested,” she said. “We think Santos’ … targets, and the feasibility of meeting them in real-world terms, deserve close scrutiny. We have asked the courts to do that. If ASIC is also going to take a closer look, we certainly welcome that.”

Santos says CCS is “a critical technology” for meeting the Paris Agreement targets, and the company is developing several projects including in South Australia, which will be one of the biggest in the world when it starts in 2024. The Moomba CCS project was registered with the Clean Energy Regulator in November 2021.

Santos declined to comment, as did ASIC, except to note an October speech by Karen Chester, the regulator’s deputy chair, in which she warned “the economic costs of greenwashing cannot be overstated”.

“Companies or funds engaging in greenwashing attract capital at the expense of others that are more worthy – creating costly inefficiencies,” Ms Chester said.

Another activist shareholder group, Market Forces, in August made a complaint to ASIC about what it claims were misleading statements from Santos justifying new oil and gas fields. However, the regulator has not raised this complaint with the company.

Santos’ emissions profile and targets have long been controversial, with climate-focused groups questioning whether it was being clear with investors. A review of its sustainability report authored by the Institute for Energy Economics and Financial Analysis in April accused Santos of hiding an increase in emissions – due to its acquisition of Oil Search – “in a table on page 54”. “Santos does not disclose its emissions upfront in its chair’s message or its chief executive officer’s introduction, a somewhat glaring omission for an annual climate report,” wrote the IEEFA’s Bruce Robertson.

ASIC took its first greenwashing action in October, against listed gas developer Tlou Energy.

Originally published as ASIC monitoring Santos court action over greenwashing claims