Greenwashing ESG
iStockphoto/pcess609

An Australian pension fund is being sanctioned by a federal court in Australia for greenwashing misconduct.

Last year, the Federal Court of Australia ruled that the fund, Active Super, breached the law by investing in securities that, it claimed, were excluded from its investment universe by its ESG screens.

While its marketing materials promised that it excluded investments in oilsands, coal mining, gambling, and Russia, the fund allegedly violated those commitments in its direct and indirect portfolio holdings.

Now, the court has ordered the fund to pay a $10.5-million (Australian dollars) penalty.

“This is a significant penalty that sends a strong message to companies making sustainable investment claims that those claims need to reflect the true position,” said Sarah Court, deputy chair of the Australian Securities and Investments Commission (ASIC), in a release.

In its ruling, the court said that the fund, “benefited from its misleading conduct by misrepresenting the ‘ethical’ nature of a significant part of its investments, which on any view enhanced its ability to attract investors… and enhanced its reputation as a provider of investment funds with ESG characteristics.”

While there were no financial losses associated with the misconduct, the court noted that “investors lost the opportunity to invest in accordance with their investment values.”

And, it said that the misconduct likely led to investors losing confidence in ESG programs.

The court also noted that the fund expressed some contrition for its misconduct and has taken steps to improve compliance.

“This case demonstrates ASIC’s commitment to taking on misleading marketing and greenwashing claims made by companies promoting financial services. It is our third greenwashing court outcome, and we will continue to keep greenwashing in our sights,” the ASIC’s Court said.