ASIC steps up greenwashing crackdown; sues Active Super over Russia, green claims

ASIC vows more to come in a string of lawsuits, as it accuses $13bn Active Super of false ethical claims while holding Russian and fossil fuel investments.

“There’s no doubt that people put their money with Active Super in response to claims that it was an ethical and responsible superannuation fund,” ASIC Deputy Chair Sarah Court. Picture: Ian Currie

The corporate watchdog has sued Active Super, a self-proclaimed “responsible investment leader,” alleging that the fund falsely represented itself as ethical while investing in coal, mining, oil, and Russian securities, contradicting its claims of eliminating such exposures.

It is the most recent of a string of lawsuits by the Australian Securities and Investments Commission, after vowing in 2022 to crack down on misleading claims about financial products purported to be ethical or socially responsible.

It took global fund giant Vanguard to court over similar “greenwashing” accusations last month after launching its first case in February against Mercer Super.

On Friday ASIC deputy chair Sarah Court said the regulator was far from done.

“We are certainly continuing our work in the greenwashing area so we still have a number of investigations that we are continuing to work through,” she told The Australian.

“Companies are not required at the moment to make environmental or sustainability claims. They are making these representations about positive environmental or other credentials in order to attract investors or to attract consumers to their products.”

“Regulators are responding to that and really calling for truth and careful attention paid to those claims that are being made,” she said.

The Australian Competition & Consumer Commission has also recently ramped up scrutiny of companies making unsubstantiated claims about the environmental benefits of their products.

ASIC’s lawsuit, launched on Thursday at the Federal Court, claims that following Russia’s invasion of Ukraine in early 2022, the fund previously known as Local Government Super told investors and potential investors they would stop investments linked to the Kremlin-ruled nation.

Despite that, the $13.5bn fund held exposures to Russian state-owned companies such as Gazprom, the world’s largest producer of natural gas, and Rosneft Oil Company, also one of the world’s largest publicly traded petroleum companies.

Active Super’s holdings in Russian securities remained in place as at June 30, 2023, the regulator said.

The fund also spruiked its green and socially responsible credentials on documents, on its website and social media sites such as Facebook, Instagram and LinkedIn, claiming it did not make investments posing “too great a risk to the environment and the community” including in the tobacco manufacturing, oil tar sands and gambling sectors.

“There’s no doubt that people put their money with Active Super in response to claims that it was an ethical and responsible superannuation fund,” Ms Court said.

The promises, however, were false, according to the regulator’s statement of claim.

From February 1, 2021 to the end of June this year, Active Super directly or indirectly held 28 holdings that exposed members to securities it claimed to restrict, including ConocoPhillips, Coronado Global Resources and New Hope Corporation, Whitehaven Coal, PointsBet and Amcor, the document says.

Active Super said in a statement that it had co-operated with ASIC’s investigation and that it “welcomes increased scrutiny on ESG disclosure standards as being good for members, the super industry and the community.”

Ms Court said companies making voluntary claims about green or ethical credentials needed to ensure they were true in order to comply with corporations law that prohibits misleading or deceptive conduct.

There is “a concerted push by the regulators across the economy recognising that there is a significant growing demand from consumers and investors to get information about the environmental credentials of the companies that they are investing or the products they are buying.,” she said.

“But we are unfortunately finding that when we closely analyse some of the representations that are being made, what’s happening behind the scenes is not living up to those promises.”

The federal government is consulting on new legislation due to come into law in July next year, that will force big businesses to make climate risk disclosures.