Stockholm (NordSIP) – In August 2023, the Australian Securities and Investments Commission (ASIC) sued pension fund LGSS Pty Limited, also known as Active Super*, for “misleading conduct and misrepresentations to the market relating to claims it was an ethical and responsible superannuation fund” on its website, disclosure documents and on Facebook, Instagram and LinkedIn
Now, Australia’s Federal Court has found Active Super guilty of misleading clients and misrepresenting its environmental, social and governance (ESG) credentials. “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. ASIC took this case because it sends a strong message to companies making sustainable investment claims that they need to reflect their true position,” ASIC Deputy Chair Sarah Court (Pictured) said following the court’s ruling.
This is the third case ASIC wins on greenwashing grounds following similar rulings against Vanguard and Mercer Superannuation.
Greenwashing Claims
According to ASIC, from 1 February 2021 to 30 June 2023, Active Super held 28 holdings in gambling, tobacco, oil tar sands and coal mining companies either directly or indirectly, which it claimed to have restricted in some form.
ASIC also alleged that following the start of the war in Ukraine in February 2022, Active Super had told clients it would stop investments in Russian companies even though Active Super had holdings in Russian securities, which remained in place as of 30 June 2023.
The Ruling
On 5 June 2024, Justice O’Callaghan found that Active Super published representations which were “misleading and deceptive in relation to exclusions applied to gambling, coal mining, Russian entities and oil tar sands investments on its website, reports and disclosure documents”. However, the Court also found that Active Super did not mislead clients regarding its holdings in tobacco companies. .
The judge found that the use of the terms such as such as “not invest”, “No Way” and “eliminate” were unequivocal and not the subject of any potential qualifications by LGSS’s “Sustainable and Responsible Investment Policy”. In his judgment, Justice O’Callaghan stated. However, the judge also found that specific representations regarding Active Super its Sustainable and Responsible Investment Policy were not misleading with respect to Russian or oil tar sands investments
The judge also 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 and stated that. “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. 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.’
Next Steps
Following this ruling, the Court will consider the appropriate form of declaratory relief. The Court will consider the pecuniary penalty to impose for the conduct at a later date. In November 2023, Mercer Superannuation was ordered to pay AU$12 million penalty for misleading representations and fee disclosure failures
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*Active Super is a superannuation fund with approximately $13.5 billion in superannuation assets. As of 1 July 2023, Active Super has 89,000 members. Superannuation funds are savings system for workplace pensions in retirement used to finance defined contribution pension schemes.
