ASIC commenced proceedings against Active Super on the basis that it had made a number of false and misleading representations in unequivocal and absolute terms in relation to investments made by the superannuation fund.

The Federal Court decision of Australian Securities and Investments Commission v LGSS Pty Ltd [2024] FCA 587 provides further insight on the latest decision regarding greenwashing.

Background

ASIC commenced proceedings against LGSS on 10 August 2023. LGSS is a trustee of the superannuation fund Active Super. ASIC alleged that Active Super had made false or misleading representations, and engaged in conduct liable to mislead the public in relation to investments made by the superannuation fund.

Misrepresentations

Active Super claimed that it was committed to the Environmental, Social and Governance (ESG) factors in its investment decision making. However, ASIC alleged that Active Super invested in sectors which were contrary to the ESG factors and its Sustainable and Responsible Investment Policy (SRI Policy).

In particular, Active Super represented that it would not make or hold investments in companies that derived:

more than 10% of their revenue from gambling (Gambling Representations);
any revenue from tobacco (Tobacco Representations);
any revenue from oil tar sands projects (Oil Tar Sands Representations);
one-third or more of their revenue from coal mining (Coal Mining Representations).

Following Russia’s invasion of Ukraine, Active Super also represented that it would divest its Russian investments and make or hold no further investments in Russia (Russian Representations).

Some of the claims made by Active Super were made in absolute terms. On its website, Active Super published visual representations setting out categories in which investments could fall. An investment in gambling was represented to fall within the “No way” category.

For some of the representations, Active Super relied on content in its SRI Policy which it claimed included the relevant information and terms and conditions about the investments and which was “two clicks away”.

Court Findings

The Court held that Active Super had made false or misleading representations and engaged in conduct liable to mislead the public in relation to its Gambling Representations, Oil Tar Sands Representations and Coal Mining Representations.

The misrepresentations were found in Active Super’s SRI policy, annual reports, social media, CEO’s statement on magazines and on its website.

Amongst the Court’s findings were that:

Critical language including the words “not invest”, “No Way” and “eliminate” implied that the Fund would not hold investments in companies that derived revenue from the some of the above sectors.
There were no clear footnotes, asterisks or other qualifiers to make clear that some of the above representations were subject to specific conditions or limitations that were embedded in the terms and conditions, such as those in the SRI Policy.
That “unequivocal language[s]” such as to “eliminate investments”, “no way” and “not invest” would undoubtedly convey to the “ordinary and reasonable member or prospective member” of Active Super that it would not invest in said sectors.

The Court is yet to determine the penalty amount that will be imposed on Active Super but it is likely to be significant given recent history.

Key Take Aways

Any sustainability related claims being made should be founded on accurate and factually sound grounds.
Take care when using unequivocal and absolute language and ensure such language is not likely to mislead.
ASIC has clear intentions to continue with its greenwashing investigations and prosecutions.
The Courts are not shying away from substantial penalty amounts for businesses found to be involved in greenwashing.

If you would like to discuss how best to make sustainability related claims about your business or need assistance with your case, please contact:

Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au

Inshani Ward
Senior Associate
T: +61 3 9611 0110 | M: +61 413 557 157
E: iward@sladen.com.au

Samuel Zhang
Law Graduate
E: szhang@sladen.com.au