Spin cycle: ASIC wins third ‘greenwashing’ case in the Federal Court

ASIC remains committed to prosecuting and seeking substantial penalties against companies which engage in ‘greenwashing’ to promote financial services and products. Last month, the Federal Court ordered Active Super to pay a $10.5 million penalty.¹

ASIC defines ‘greenwashing’ as the ‘practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical’.²

In June 2024, the Federal Court found that Active Super had engaged in greenwashing by making false and misleading representations to members and potential members about its “green” or environmental, social and governance (ESG) credentials, and had therefore contravened Australia’s financial services laws.³

This is the third greenwashing penalty handed down by the Federal Court in the last 8 months and follows ASIC’s successful outcomes against:

• Mercer Super, who in August 2024 was ordered to pay a $11.3 million penalty (our previous article on this is available here); and
• Vanguard Investments Australia, who in September 2024 was ordered to pay a $12.9 million penalty for making misleading claims about ESG exclusionary screens (our previous article on this is available here).

Where did Active Super make the statements?

Active Super made the representations on its website, in an email to over 45,000 members, in various disclosure documents and ‘Impact Reports’, as well as on its social media pages and in an interview with the CEO in Investment Magazine.

What were the misleading representations?

Broadly, ASIC alleged that Active Super made misleading representations by stating that it would not make or hold investments in companies that derived:

1. more than 10% of their revenue from gambling;
2. any revenue from tobacco;
3. any revenue from oil tar sands projects;
4. more than one-third of its revenue from coal mining; or
5. revenue from investments in Russia (following Russia’s invasion of Ukraine) and that Russian investments were ‘out’.

The below visual representation was published on Active Super’s website on 25 May 2021:⁴

In fact, investor funds were exposed to:

• gambling companies listed on the ASX;
• coal mining companies Whitehaven Coal Ltd and Coronado Global Resources Inc;
• ConocoPhillips and Shell Plc, companies involved in oil tar sands activities; and
• Russian entities Gazprom PJSC, Rosneft Oil Company and Sberbank of Russia.

Outcome

In June 2024, the Federal Court found that Active Super contravened sections 12DB(1)(a) and 12DF(1) of the ASIC Act by making false or misleading representations in relation to investments in gambling, oil tar sands, coal mining and Russia.

However, the Court found that Active Super’s representations about avoiding investments in tobacco companies were not misleading.

Justice O’Callaghan stated that Active Super:⁵

‘[B]enefitted from its misleading conduct by misrepresenting the “ethical” nature of a significant part of its investments, which on any view enhanced its ability to attract investors to the Active Super fund and enhanced its reputation as a provider of investment funds with ESG characteristics. As a result, investors lost the opportunity to invest in accordance with their investment values.’

It is clear that ASIC will continue its enforcement activity for suspected greenwashing, with ASIC Deputy Chair, Sarah Court, stating:

‘This case demonstrates ASIC’s commitment to taking on misleading marketing and greenwashing claims made by companies promoting financial services. It is our third greenwashing court outcome, and we will continue to keep greenwashing in our sights.’ 

The penalty imposed on Active Super serves as a timely reminder for businesses to exercise caution in making environmental claims on all forms of marketing materials.

How to avoid greenwashing

1. Avoid vague terminology, unless you are willing to explain precisely what is meant by such terminology (e.g. what factors make your product ‘socially responsible’?). ASIC has foreshadowed its future areas of interest will likely include the use of vague terms such as ‘clean’ or ‘green’.
2. Ensure that headline claims in promotional materials (including on social media) accurately reflect the detailed statements in any product disclosures and product characteristics.
3. Exercise caution around using unequivocal and ‘absolute’ claims (e.g. “100% recyclable”, “zero emissions” etc.).
4. Where reliance is placed on third parties for ESG credentials, consider the reliability, independence and relevance of such third-party assessment.
5. Ensure comparator claims (e.g. “generates less waste than conventional products”) are well evidenced and are a fair comparison.
6. Consider potential for imagery to mislead (e.g. nature-related imagery).
7. Ensure that targets (e.g. “net zero by 2030”) are realistic, supported by evidence and are well defined. ASIC has identified net zero statements and targets as a future area of interest.
8. Incorporate greenwashing considerations into processes for review and approval of product literature.
9. Ensure qualifications to any investment screening processes are prominently disclosed.
10. Ensure compliance with representations during the product lifecycle (e.g. not just at the time of issue of the product).

This article was written by Polat Siva, Partner and Alex Porz, Associate.

¹ Australian Securities and Investments Commission v LGSS Pty Ltd (No 3) [2025] FCA 205. Active Super managed approximately $14.7 billion in superannuation assets for 86,547 members.

² Information Sheet 271 (INFO 271).

³ The Corporations Act 2001 (Corporations Act) and the Australian Securities and Investments Commission Act 2001 (ASIC Act) contain general prohibitions against making statements that are false or misleading, or engaging in dishonest, misleading or deceptive conduct in relation to a financial product or financial service. See for example, sections 1041E, 1041G and 1041H of the Corporations Act, and sections 12DA and 12DB of the ASIC Act.

⁴ Australian Securities and Investments Commission v LGSS Pty Ltd [2024] FCA 587, [74].

⁵ Australian Securities and Investments Commission v LGSS Pty Ltd (No 3) [2025] FCA 205, [136].