ASIC sees red on greenwashing

By Selina Nutley

‘Greenwashing’, the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable, or ethical, was first punished by ASIC in 2022. ASIC issued a total of eight infringement notices for alleged greenwashing in 2022, one so far in 2023, and has now launched its first court proceedings alleging greenwashing.

ASIC can issue an infringement notice under the ASIC Act. In the context of greenwashing, ASIC has relied on a general provision of the legislation which provides a corporation must not, in the supply or possible supply of financial services, or in connection with the promotion of the supply or use of the financial services, falsely represent its services are of a particular standard, quality, value, or grade.

This article outlines the first court action brought by ASIC plus the nine notices issued by ASIC, including four issued to Tlou Energy (Tlou), three issued to Vanguard Investments Australia (Vanguard), and one issued to Diversa Trustees (Diversa) and Black Mountain Energy (BME).

Greenwashing – an enforcement priority

ASIC deputy chair Sarah Court has publicly stated ASIC will “continue to closely monitor sustainability claims and take action where we consider representations cannot be substantiated or are factually incorrect”. On 28 February 2023, ASIC launched its first greenwashing court action against Mercer Superannuation (Australia) for making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options. Mercer made statements about seven ‘Sustainable Plus’ investments being suitable to investors committed to sustainability as the investments did not invest in entities concerned with alcohol, gambling, or fossil fuels. ASIC contends Mercer misled the public as several companies invested in by Mercer engaged in such activities.

The importance of being ‘reasonable’

ASIC took its first action for greenwashing against listed energy company Tlou in October 2022, with Tlou paying $52,280 to comply with four infringement notices. ASIC raised concerns about false and misleading statements made by Tlou to the ASX. Tlou issued public announcements that electricity produced by Tlou was carbon neutral, low emission, and its projects were producing clean energy.

ASIC started off strong in 2023 taking action against listed energy company BME, issuing three infringement notices for alleged false or misleading sustainability statements made to ASIC between December 2021 and September 2022.  BME elected to pay $39,960 to ASIC to comply with the notices.

In the above instances, ASIC contended both Tlou and BME did not have a reasonable basis to make the representations or the representations were incorrect. ASIC contended BME did not demonstrate any specific modelling, details, or feasibility plan as to how its claims would be achieved.

Statements about ESG matters

In December 2022, Vanguard paid $39,960 in response to three infringement notices issued by ASIC. ASIC was concerned the PDS issued for the relevant Vanguard fund would likely mislead the public, by overstating the claim Vanguard would not invest in companies significantly involved with tobacco sales. ASIC considered the fund would invest in a range of companies involved in the tobacco industry therefore misleading investors seeking sustainable or ethical returns. This is the first time ASIC has taken action against a company for greenwashing in relation to misleading ethical propositions.

ASIC issued a similar infringement notice to Diversa in December 2022 for a total sum of $13,320. Marketing material released by Diversa claimed the fund did not invest in companies involved in polluting activities or entities that cause environment and social harm. ASIC considered these statements were generic in nature and the investment screens alluded to were narrowly implemented by Diversa, so potentially misrepresenting the extent of social and environmental benefit of the fund to investors.

What should companies do from here?

Interestingly, most of ASIC’s attention and enforcement action is focused upon sustainability-related claims rather than ethical or governance issues which also fall under the environmental, sustainability, and governance considerations within the greenwashing framework. However, given the relatively small number of actions brought so far, it is unclear if ASIC will continue to target one area over the other.

Lastly, ASIC’s deputy chair Sarah Court has repeatedly warned entities they must be able to support any statements and provide evidence and the basis for their claims.

Companies need to be able to provide substantial evidence to support any claims made in offer documents, such as details of models or investment screens, and should endeavour to provide at least a cursory overview of their evidence in offer documents to provide a transparent message to potential investors.

What should fund managers do now?

Beyond ensuring disclosure documents are `true to label’, fund managers’ policies and procedures on assessment, reporting and divestment of non-compliant assets will no doubt come under scrutiny.  With indications of a number of investigations on foot, and ASIC announcing greenwashing as a 2023 enforcement priority, we can expect to see further action as the year progresses.  Reach out to our team team if you need assistance.


Selina Nutley

Selina has extensive experience in all aspects of commercial litigation and dispute resolution.

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