In Australian Securities and Investments Commission v Mercer Superannuation (Australia) Limited [2024] FCA 850 the Federal Court of Australia decided that Mercer contravened sections 12DB and 12DF(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) by engaging in conduct that was liable to mislead the public as to the nature and characteristics of financial services that it provided through seven different “Sustainable Plus” investment options (Sustainable Plus Options) offered in the Mercer Super Trust.

Mercer was ordered to pay to the Commonwealth a pecuniary penalty of $11,300,000 as well as ASIC’s costs of $200,000. It was also ordered to publish a notice about the decision. Background.

Mercer admitted it made representations on its website and in a video published online during four different periods from 12 November 2021 to 1 March 2023 that its “Sustainable Plus” investment options excluded, and would continue to exclude, investments in companies involved in or deriving profit from the production or sale of alcohol, gambling, and the extraction or sale of carbon intensive fossil fuels.

It admitted the representations were false and misleading because six of those seven investment options actually included investments in such companies, and Mercer’s investment policies actually permitted such investments.

Justice Horan observed:

“Conduct of this kind is known as “greenwashing”, which broadly speaking involves making false or misleading environmental or sustainability claims in order to make a company or its business appear more environmentally friendly, sustainable or ethical, particularly in order to induce consumers to purchase its products or services or to invest in the company. Greenwashing has a particular manifestation in relation to financial products, including superannuation and life products…

greenwashing practices have the potential to reduce consumer confidence in environmental, social and corporate governance (ESG) claims, which undermines the efforts of businesses that are pursuing ESG goals accurately and fairly. In addition to harming consumers by depriving them of information relevant to making choices in accordance with environmental, social and ethical values or objectives, false or misleading ESG claims may confer unfair competitive advantages on companies in marketing their financial products and services…

The contraventions admitted by Mercer are serious. They arose from failures by Mercer to implement adequate systems to ensure that ESG claims in relation to its superannuation products were accurate, and to monitor and enforce the application of any sustainability exclusions associated with such ESG claims. While Mercer took some limited corrective action … in July 2022, it failed to carry out a full and thorough review of its ESG compliance until after the commencement of the current proceeding. “

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