ASIC and the ACCC continue to deliver on their promises to intensify enforcement activity for suspected greenwashing behaviour. Last Tuesday ASIC announced it had commenced civil penalty proceedings against Mercer Superannuation (Australia) Limited (Mercer) for alleged greenwashing behaviour. ASIC’s action follows a spate of infringement notices issued over the past three months for similar conduct. The ACCC too has recently made announcements in this area. Last Thursday the ACCC announced the results of its latest internet sweep and identified significant concerns with environmental claims made. The ACCC foreshadowed that it would be ‘investigating a number of businesses for potential greenwashing‘ as a result. Now, more than ever, businesses need to tread carefully with their ESG claims.
ASIC’s action against Mercer
On 27 February, ASIC filed an originating process and concise statement in the Federal Court against Mercer. The originating process and concise statement are yet to be released publicly. However, ASIC’s press release provides details of its claim. In summary, ASIC alleges that:
- Mercer made statements on its website about seven ‘Sustainable Plus’ investment options which purported to exclude investments in companies involved in carbon intensive fossil fuels like thermal coal as well as companies involved in alcohol production and gambling, and made statements on its website that the Sustainable Plus fund was suitable for members ‘deeply committed to sustainability‘;
- in fact, members who took up the Sustainable Plus investment option held investments in companies involved in the extraction or sale of carbon intensive fossil fuels, the production of alcohol and gambling; and
- as a result, ASIC alleges Mercer made false and misleading statements and engaged in conduct that could mislead the public.
ASIC’s case against Mercer marks the first time it has commenced proceedings against a company for alleged greenwashing behaviour. It is also the first time ASIC has used its powers against a superannuation trustee following the reforms introduced by the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth). ASIC’s enforcement actions to date have resulted in the issue of infringement notices with relatively modest fines with no admission of liability. The civil penalty proceedings against Mercer will be the first time ASIC has put its case on greenwashing before the Courts. Whilst the full details of ASIC’s case will emerge over time, the action may invite the Court to consider questions such as:
- the meaning of companies ‘involved in carbon intensive fossil fuels‘;
- the extent to which statements on websites regarding environmental claims should be read in context with other documents such as the more detailed product disclosure statement and associated guidance;
- the prominence that should be given to the processes to exclude certain investment on ESG grounds;
- what investors ‘deeply committed to sustainability‘ would have expected from their investments in Mercer’s fund; and
- the approach that ASIC and the Court will take to penalty for the alleged misconduct.
It will be some time before we receive any clarity on such issues. Regardless, the landmark case will be closely watched by industry and practitioners for insights into how ASIC and the Courts interpret potentially misleading environmental claims.
In October 2022, the ACCC announced that it was undertaking an internet sweep of a sample of businesses to assess the environmental claims made. Last Thursday, the ACCC published the results of the internet sweep finding that of the 247 businesses reviewed during the sweep, ‘57 per cent were identified as having made concerning claims about their environmental credentials‘. The ACCC said that it will be commencing investigations off the back of its survey work, which would supplement the ‘several active investigations‘ already underway across the packaging, consumer goods, food manufacturing and medical devices sectors. For further details on this recent development read the recent post available here.
Where to next?
In our post from December last year, we described the current areas of focus for ASIC’s enforcement action (false claims and unsubstantiated claims) and set out other possible areas of focus in the future where ASIC (or indeed the ACCC) may seek to investigate firms for potential misconduct. Based on the recent announcements from regulators, scrutiny of businesses’ environmental claims through increased enforcement action and more intensive supervisory scrutiny is set to continue throughout 2023 and into the future.
Investigations by regulators are not the only ‘greenwashing’ risk faced by companies. Public interest groups and shareholders alike have increasingly turned to the Courts to prompt change from listed companies regarding their climate related disclosures. We will be publishing more on this topic in the coming months.
This article was written by Polat Siva, Partner and Brenton Pollard, Special Counsel.