Australia-first as watchdog ASIC takes Mercer Super to court over greenwashing

Mercer Super has become the first Australian company to be sued over alleged greenwashing, as corporate watchdog ASIC makes good on its crackdown on the Australian business community regarding bogus green marketing claims.

Greenwashing is an emerging term for the practice of representing that a financial product, investment strategy, or business’s operations are environmentally friendly, sustainable, or ethical when in actuality is a distortion to influence investment or consumer decisions.

The Australian Securities & Investments Commission (ASIC) confirmed it had launched court action against Mercer over alleged “misleading statements about the sustainable nature and characteristics of some of its superannuation investment options”.

“This is the first time ASIC has taken an Australian entity to court regarding alleged greenwashing conduct, and it reflects our continuing efforts to ensure sustainability-related claims made by financial institutions are accurate,” ASIC Deputy Chair Sarah Court said.

The alleged greenwashing in question

The case relates to seven ‘Sustainable Plus’ investment options offered by the Mercer Super Trust (MST), of which Mercer is the trustee, where Sustainable Plus options were marketed to members who were “deeply committed to sustainability”.

The products were suitable for that cohort, Mercer’s website copy read because they intentionally excluded investments in fossil fuel companies including thermal coal (as well as alcohol and gambling companies).

But ASIC alleges the products actually invested in no fewer than 15 companies involved in the extraction or sale of carbon-heavy fossil fuels including AGL Energy, BHP Group, Glencore, and Whitehaven Coal.

The regulator said there were also investments in 15 booze companies, including Budweiser Brewing Company, Carlsberg, Heineken, and Treasury Wine Estates, and 19 gambling companies, including Aristocrat Leisure, Caesar’s Entertainment, Crown Resorts, and Tabcorp.

In a statement to SmartCompany, a Mercer spokesperson acknowledged the civil penalty proceeding and that it related to “certain statements on the MST website concerning the extent of investment exclusions applied in the MST’s Sustainable Plus investment options”.

“Mercer has co-operated with ASIC throughout its investigation, and will continue to carefully consider ASIC’s concerns with respect to this matter,” the spokesperson said.

“It would be inappropriate to comment further as the matter is now before the courts.”

A warning to businesses

Court said it was a warning for other companies that ASIC would take action on instances of misleading marketing and greenwashing, citing an “increased demand for sustainability-related financial products”.

“If financial products make sustainable investment claims to investors and potential investors, they need to reflect the true position. If investments in certain industries like fossil fuels are said to be excluded, this promise must be upheld,” Court said.

Since ASIC announced its greenwashing crackdown, some $140,000 in fines have been dished out to Australian companies including Tlou Energy, Vanguard Investments, Diversa Trustees, and Black Mountain Energy.

Tlou Energy Limited was fined $53,280 last year for “factually incorrect” statements as part of two ASX announcements in 2021, namely that electricity produced by Tlou was carbon neutral and that Tlou had environmental approval and the capability to generate certain quantities of electricity from solar power. Both were false, ASIC said.

At the time, Court said the agency was investigating “a number of” listed entities, super funds, and managed funds in relation to their green credentials claims and warned ASIC would “take enforcement action, including court action, for serious breaches”.

Mercer Super marks this the first time the commission has done so, following legislative amendments from the Financial Services Royal Commission that emboldened ASIC’s regulatory powers in superannuation.

ASIC is seeking not only declarations and pecuniary penalties, but an injunction to stop Mercer from spruiking the alleged claims, and to force Mercer to go public about any contraventions found by the court.