Active Super fined $10.5m for greenwashing

The super fund has warned any penalty above $2.5m would see members pay at least 30c on the dollar from their retirement savings.

Active Super has been fined $10.5m for pumping up its climate credentials. Picture: Gabriel Bouys/AFP

Active Super has been fined $10.5m for misleading claims over its green credentials, with members now facing the prospect of a levy on their fees as a result of the penalty.

The Federal Court on Tuesday imposed the fine on Active Super, formerly Local Government Super, with the cost expected to be covered by the fund’s insurance.

But capital gains on any insurance proceeds of 30c in the dollar will be for members to pay, according to submissions made by the fund’s acting chief executive to the court.

Handing down his judgement, Justice O’Callaghan ordered Active Super to pay the fine within 30 days of it receiving a penalty notice and publish, at its own expense, a written adverse publicity notice with the heading, “Notification of Misconduct by Active Super”.

In a submission to the court, Active Super acting CEO Donna Heffernan warned the fund’s trustee would be able to pay a penalty up to $20m using insurance funds but that any insurance proceeds would be treated as a capital gain and subject to a 30 per cent corporate tax rate.

“[A] penalty in excess of $2.456m would reduce the pool of funds available for investment, and thereby reduce the returns that the fund members rely on for financial security in their retirement,” the fund warned.

Justice O’Callaghan acknowledged Active Super’s argument, saying in his judgement: “As such, LGSS’s (the trustee’s) members would have to pay from their retirement savings at least 30c on the dollar of any penalty exceeding $2.456m.”

He rejected the fund’s call for a lower penalty below $2.5m that would not adversely impact members.

“To fix a penalty by reference to a sum that seeks to guarantee that fund members suffer no indirect loss by a reduction in their returns would neutralise the sting of any penalty,” Justice O’Callaghan said.

“If a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d’être of its imposition”.

ASIC deputy chair Sarah Court acknowledged Active Super members may be “indirectly affected via some form of levy” to pay the tax on the insurance proceeds.

“The court has now considered this issue squarely and formed the view that the impact on members is one relevant matter to take into account, but it’s not the only relevant matter, and that the bigger significance of penalties … is we are trying to send deterrent signals, both specifically to that entity, but just as importantly, to the broader sector, to deter this kind of conduct,” Ms Court told The Australian.

“The regulatory message here is the same (as with recent AustralianSuper and Cbus cases). It’s that you have to take these obligations seriously.”

ASIC had sought a penalty of $13.5m.

A spokesperson for LGSS said the fund’s trustee was reviewing the penalty judgment and considering its options.

The $10.5m penalty follows the federal court in June finding Active Super broke the law when it falsely pumped up its climate credentials and misled customers, including by claiming Russian investments were “out” following the invasion of Ukraine.

Between February 1, 2021 and June 30, 2023, Active Super invested, directly and indirectly, in securities it claimed to have eliminated or restricted according to its environmental, social and governance investment screens.

The company claimed in marketing materials it did not invest in gambling, coal mining and oil tar sands, and said “(we) added Russia to our list of excluded countries following the invasion of Ukraine”.

But ASIC said Active Super actually held nine investments in Russia during the relevant period including in: Rosneft Oil Co, Etalon Group, Mail.ru, Transneft PJSC, Yandex NV, Sberbank of Russia and three investments in Gazprom PJSC through the Macquarie and Wellington Funds.

Additionally, Active Super invested in gambling companies SkyCity Entertainment Group Ltd and Pointsbet Holdings Ltd, oil tar sands companies ConocoPhillips and Shell PLC, along with Whitehaven Coal Limited and Coronado Global Resources.

Since the June 2024 judgement, Active Super has merged with peer Vision Super. The merger completed on March 1.

A Vision Super spokesman said Active Super’s trustee, LGSS, was responsible for the payment of the penalty as it related to historical issues with the fund’s disclosures.