The Australian Securities and Investments Commission (ASIC) first launched civil penalty proceedings against Active Super in August last year, following alleged greenwashing in its Impact Report.

Active Super, which has approximately $13.5 billion in superannuation assets and 89,000 members, represented on its website that it eliminated investments that posed too great a risk to the environment and the community, including tobacco manufacturing, oil tar sands, and gambling. Active Super also stated that it had added Russia to its list of excluded countries following the invasion of Ukraine.

However, ASIC alleged that Active Super exposed its members to investments it claimed to restrict or eliminate.

The Federal Court found that between 1 February 2021 and 30 June 2023, Active Super invested in those securities it originally claimed had been eliminated via ESG investment screens.

In the judgment, Justice David John O’Callaghan rejected Active Super’s claims that an ordinary or reasonable consumer would draw a distinction between holding shares in a company and indirect exposures through a pooled fund.

“I am unable to accept LGSS’s contention that an ordinary and reasonable member of the relevant class would draw a distinction between holding shares in a company and indirect exposures through pooled funds,” O’Callaghan J stated.

“It seems to me that such a consumer would not draw that distinction, including in particular because there is nothing in the Impact Reports or on the LGSS website that suggests that the claims that there was, for example, ‘No way’ Active Super would invest members funds in gambling, tobacco and so on, was to be read subject to a proviso that there was a way in which it would do exactly that, by investing indirectly, not directly. In my view, that distinction is one which no ordinary reasonable consumer would draw.”

VIEW ALL

While ASIC’s remaining alleged representations were upheld, the Federal Court found that Active Super did not engage in misleading representations regarding its holdings in companies involved in the production of tobacco products packaging and that specific representations in its Sustainable and Responsible Investment Policy were not misleading with respect to Russian or oil tar sands investments.

Within its Sustainable and Responsible Investment Policy, Active Super used terms such as “not invest”, “No Way”, and “eliminate” – which the court found were unequivocal and not the subject of any potential qualifications.

“If such a consumer was told, as they were told, that there was ‘No way’ that LGSS would invest in tobacco or gambling, he or she would not search around for some investment policy that might qualify such statements,” O’Callaghan J said in the judgment.

“Absent some indicator on the face of it, such as a footnote or asterisk with some accompanying statement that the apparently unqualified language was, in fact, something that was subject to qualifications or limitations, they would have no reason to.”

ASIC deputy chair Sarah Court said that this case sends a “strong message” to those engaging in greenwashing.

“This is a significant outcome which shows our commitment to taking on misleading marketing and greenwashing claims made by companies in the financial services industry,” she said.

“ASIC took this case because it sends a strong message to companies making sustainable investment claims that they need to reflect their true position.”

The matter has been listed for a further hearing, during which the court will consider the appropriate form of declaratory relief, as well as decide the penalty for the conduct.