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Mercer cops $11.3m greenwashing fine after Federal Court orders

Yasmine Raso2 August 2024
Green washing

Mercer Superannuation has been ordered by the Federal Court to pay an $11.3 million fine after it admitted to making misleading statements about aspects of sustainability in its super investment options.

In what became the Australian Securities and Investments Commission’s (ASIC’s) first greenwashing case and had court action launched against Mercer back in 2023, the Federal Court agreed that the firm had published deceptive statements on its website about seven ‘Sustainable Plus’ investment options available via the Mercer Super Trust.

The statements encouraged members to believe that the Sustainable Plus options excluded investments in companies involved in carbon-intensive fossil fuels like thermal coal, as well as alcohol production and gambling. Online information stated the investment suite was fitting for those who “are deeply committed to sustainability”.

“This was ASIC’s first greenwashing case brought before the Federal Court; a landmark case both for ASIC and for the financial services industry. It demonstrates the importance of making accurate ESG claims to investors and potential investors,” ASIC Deputy Chair, Sarah Court, said.

“Today’s matter is a strong example to the financial services industry of the greenwashing action we will take. We will continue to monitor the market for ESG-related claims that cannot be validated by evidence to ensure the market is fair and transparent.”

Further investigation by ASIC and the Federal Court found that members who took up the Sustainable Plus options had their funds invested in companies that were supposed to be excluded, including:

  • 15 companies involved in the extraction or sale of carbon intensive fossil fuels (including AGL Energy Ltd, BHP Group Ltd, Glencore PLC and Whitehaven Coal Ltd);
  • 15 companies involved in the production of alcohol (including Budweiser Brewing Company APAC Ltd, Carlsberg AS, Heineken Holding NV and Treasury Wine Estates Ltd); and
  • 19 companies involved in gambling (including Aristocrat Leisure Limited, Caesar’s Entertainment Inc, Crown Resorts Limited and Tabcorp Holdings Limited).

“The contraventions admitted by Mercer are serious. They arose from failures by Mercer to implement adequate systems to ensure that ESG claims in relation to its superannuation products were accurate, and to monitor and enforce the application of any sustainability exclusions associated with such ESG claims,” Justice Horan said about his decision.

“It is vital that consumers in the financial services industry can have confidence in ESG claims made by providers of financial products and services.  As is the case in many other industries, consumers may place great importance on ESG considerations when making investment decisions.

“Any misrepresentations in relation to ESG policies or practices associated with financial products or services, whether as an aspect of “greenwashing” practices or otherwise, undermines that confidence to the detriment of consumers and the industry generally.”

ASIC confirmed Mercer has agreed to pay the penalty. The case against Mercer is the first of three to appear before the Federal Court, with Vanguard Investments Australia and Active Super also tied up in allegations of greenwashing.

ASIC has also handed out close to $300,000 in infringement notices in response to alleged incidents of greenwashing, including Tlou Energy Limited, Vanguard Investments Australia, Diversa Trustees Limited, Black Mountain Energy, Future Super and Morningstar.

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Patrick McMenamin
6 months ago

This fine alone is sufficient to provide 2.5 times cover for the published total cost of regulating advisers (approx.$4million). These penalties, it seems, just disappear into consolidated revenue. It is obvious that if penalties were appropriately used to cover the cost of the administration of regulation, there would be no fees payable by “compliant” advisers and mortgage brokers. This would be a “just and appropriate” alternative to the current outrageous expropriation.

Edward
6 months ago

This is higher than the fine issued to Dixon Advisory. The fact the regulator is spending this much time policing “greenwashing” while there are so many bigger fish to fry blows my mind.

It seems embellishing your green credentials is worse than losing investor money through mismanagement.

ASIC is the worst
6 months ago

Another fifedom for ASIC. The label “greenwashing” absolute herring. Not one infringement was anything more than regulator feeling out PDS. There will be LESS true ESG / SDG now.

We need a new regulator. For all your feedback be very focussed. New regulator!!

Byron
6 months ago

This fine just goes to show that ESG is a waste of investment space. It’s more like a FAD than a proper investment philosophy.
You can still offer a level of ESG without trying to cover the whole spectrum of poor investing.