ASIC greenwashing penalty: Fiducian decision highlights need for ESG oversight
ASIC has secured another greenwashing enforcement outcome, with the Supreme Court of New South Wales ordering Fiducian Investment Management Services (FIMS) to pay a $7.3 million penalty for misleading environmental, social, and governance (ESG) representations and governance failures in relation to its Diversified Social Aspirations Fund (Fund).
The decision is a timely reminder that sustainability claims must be accurate, substantiated and supported by robust systems, monitoring and oversight.
Key takeaways for fund managers and responsible entities
ASIC continues to focus on greenwashing. The Supreme Court of New South Wales decision ordered FIMS to pay a $7.3 million penalty for breaching its duty to act with care and diligence as responsible entity (RE) of its Fund and engaging in conduct liable to mislead the public. The decision highlights ASIC’s continued focus on sustainability-related representations and disclosures despite it not being a specific enforcement priority for 2026
The decision extends beyond misleading ESG claims. It marks ASIC’s fourth greenwashing-related success action, but its first centred on a RE’s failure to exercise due care and diligence as required under section 601FC(1)(b) of the Corporations Act 2001 (Corporations Act).
ESG claims require effective governance and oversight. Fund managers, REs and other market participants should ensure ESG statements are backed by robust governance, effective monitoring and documented evidence.
Sustainability claims need to remain substantiated. Claims that cannot be substantiated, either initially, or on an ongoing basis, may attract regulatory scrutiny and action and cause significant reputational harm particularly as investor expectations around sustainability continue to evolve.
Background: the fund and its ESG claims
FIMS operated and was the RE of the fund. Fiducian launched the Ffund following feedback from its financial planners that clients were increasingly seeking a Fiducian fund focused on ethical investing or ESG investment objectives. Some Fiducian financial planners had raised concerns that clients would be lost if such a fund was not offered.
FIMS managed and operated the fund through its ‘manage-the-manager’ investment model, a framework used across other Fiducian funds. Under this approach, investor funds were allocated across a range of funds and investments (Underlying Investments), each overseen by a separate investment manager (Underlying Managers). FIMS was responsible for selecting both the Underlying Investments and Underlying Managers for each Fiducian fund.
During the relevant period, between 24 September 2014 and 31 May 2024, the Fund was invested in two Underlying Investments:
between 2 November 2015 and March 2022, the two Underlying Investments of the fund were the Solaris Mandate and the Candriam Fund; and
from March 2022 until the Fund closed, the two Underlying Investments of the Fund were the Candriam Fund and the Perpetual Wholesale Ethical SRI Fund (which from 1 October 2022 was renamed the Perpetual ESG Australian Share Fund (Perpetual Fund)).
The contravening period was between 3 October 2019 and 31 May 2024.
The Fund’s Product Disclosure Statement (PDS) contained the following statements:
share portfolios will include investments in companies that aim to be positive for society and the environment and aim to avoid investments in harmful activities;
companies to be avoided include those, amongst others, that pollute air, land and water unnecessarily, involved in goods or services harmful to humans and animals, encourage military activity or armaments, discriminate and impede human rights;
portfolio exposure, operations and performance of all Fund Managers are routinely monitored; and
Fiducian constantly monitors the Fund’s underlying investment managers to ensure they maintain their investment styles and processes
Statements one to four were identified as the ESG Statements while statements three and four were identified as the Systems and Processes Statements.
From a process perspective, each underlying investment within the fund was to be subject to specified investment screens, being rules or filters used by the relevant underlying manager to identify investments that aligned with the fund's ESG objectives.
ASIC sought declarations that FIMS contravened section 12DF of the Australian Securities and Investments Commission Act (ASIC Act) and section 601FC(1)(b) of the Corporations Act by making false or misleading statements in relation to the Fund and by failing to discharge its duty to act with care and diligence in relation to the Fund.
FIMS admitted it contravened each of section 12DF of the ASIC Act and section 601FC(1)(b) of the Corporations Act.
What did the court find about Fiducian’s ESG claims and governance?
Misleading ESG claims under the ASIC Act
FIMS admitted to six breaches of section 12DF of the ASIC Act, with each breach arising from one of the six fund PDSs issued during the contravention period. The breaches related to the ESG Statements and Systems and Processes Statements, which appeared in identical terms across all six PDSs.
The court found FIMS lacked reasonable grounds for making the ESG Statements, largely due to deficiencies in its governance, oversight and monitoring processes. FIMS admitted that:
Its governance processes required the completion of PDS checklists and obtaining board approval when making changes to the PDS. However, it altered the descriptions of the Fund’s ESG and ethical investing characteristics without following these governance processes. This is despite it apparently being aware these statements did not accurately reflect the Underlying Investments and the screening methodology used.
The non-binding nature of the Solaris Mandate's Investment Objectives and its failure to obtain a complete list of securities held by the Perpetual Fund meant it did not have a sufficient basis for the representations contained in the PDS.
FIMS also did not have adequate processes to verify or monitor alignment between the Fund's investments, its investment strategy and its ethical investment objectives or ESG Statements. Although it received periodic holdings data for certain Underlying Investments, it did not formally assess those holdings against the ethical investment objectives and ESG Statements.
The Underlying Managers did not carry out monitoring and were not required to notify FIMS of non-compliant holdings. While the Investment Committee monitored the fund, it only did so by reference to its financial performance and not by reference to its ethical investment objectives or the ESG Statements.
Responsible entity duty of care and diligence
FIMS admitted to a single contravention of section 601FC(1)(b) of the Corporations Act, which requires an RE of a registered scheme, when carrying out its duties, to exercise the degree of care and diligence that a reasonable person would exercise if they were in the REs position.
Importantly, the Court agreed FIMS had contravened that section, not because the fund held fossil fuel-related investments despite the ESG Statements, but because it represented the fund as having ESG and ethical characteristics without implementing systems, monitoring, governance and verification processes capable of ensuring those representations were true.
The Court found that a reasonable RE would have reviewed the underlying investment screens, monitored holdings against ESG objectives, acted on repeated internal warnings, obtained proper information for managers and complied with its own PDS governance processes. FIMS’ failure to do so amounted to a breach of the statutory duty of care and diligence under section 601FC(1)(b).
Why did the court impose a $7.3 million penalty?
In determining the penalty, the Court took into account that:
FIMS did not implement, follow or apply its own documented processes and policies in its management and operation of the fund. Specifically, it did not appropriately monitor or review the Underlying Investments of the fund during the relevant period;
senior FIMS employees were aware of concerns raised by investors and financial planners about whether the fund's investments aligned with its ethical investment objectives;
retail investors were denied the opportunity to make an informed choice between the fund and other ESG funds available in the market; and
there was potential for indirect harm insofar as the conduct diminished confidence in the financial system and consumers’ trust in statements made by responsible entities.
ASIC’s other greenwashing enforcement outcomes
The Fiducian decision follows a series of significant greenwashing enforcement outcomes secured by ASIC, including penalties of $11.3 million against Mercer Superannuation and $10.5 million against Active Super.
Practical lessons for fund managers and responsible entities
The decision provides the following key practical lessons for fund managers, REs and other market participants:
ASIC continues to scrutinise ESG representations. This case highlights ASIC’s continued focus on sustainability-related representations and disclosures and its willingness to pursue enforcement action despite it not being a stated enforcement priority for 2026.
ESG claims must be substantiated. Organisations should ensure any sustainability claims are supported by evidence and reflected in actual investment practices.
Governance matters. Robust ESG governance frameworks, including clear policies, oversight mechanisms and accountability structures, are critical to ensuring that sustainability commitments are implemented in practice.
Monitoring and implementation are just as important as disclosure. Fund managers and REs must have effective systems in place to monitor investments and ensure ongoing compliance with ESG objectives.
How we can help
Fund managers and REs should review their ESG disclosures, governance frameworks, and monitoring processes to ensure sustainability claims are accurate and substantiated.
If you would like to discuss how the Fiducian decision may affect your fund or need assistance reviewing your ESG disclosures and governance processes, please contact our HW Funds team.
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