On 2 August 2024, the Federal Court declared that Mercer Superannuation had made representations liable to mislead the public about the future nature and characteristics of its Sustainable Plus Options. The “greenwashing” case was brought by the Australian Securities and Investments Commission (ASIC) and the Court was satisfied that Mercer had contravened the Australian Securities and Investments Commission Act 2001 (Cth), on the basis of the Statement of Agreed Facts and Admissions put forward by the parties.

Greenwashing involves making false or misleading environmental or sustainability claims to make a business appear more environmentally sustainable or ethical. Greenwashing is part of broader Environmental Social Governance (ESG) concerns that are being prioritised by Australian regulators.

Mercer made representations about the exclusion of investments in companies involved in or deriving profit from carbon intensive fossil fuels, alcohol and gambling from its “Sustainable Plus” investment options that were false.

The agreed circumstances of the contraventions included that Mercer failed to implement a system to ensure representations were not false or misleading and that compliance with marketing checklists was not mandated or monitored.

The Federal Court made orders in terms sought by the parties. It ordered Mercer to pay a penalty of AU$11.3 million, publish a notice to be displayed on the sustainable investments page of its website for a period of six months, and pay an agreed sum of AU$200,000 towards ASIC’s costs of the proceeding.

In remarking on the seriousness of the contraventions and the importance of deterrence, the Court said “The outcome of enforcement proceedings such as the present case should send a clear signal to AFSL holders and other market participants to ensure transparency and accuracy when making any ESG claims, and to exercise diligence in adhering to such claims”.

In response to the Mercer case, ASIC said “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”. ASIC has two further cases before the Federal Court concerning greenwashing.

The Australian Competition and Consumer Commission (ACCC) also regulates greenwashing under the Australian Consumer Law. In 2023, the ACCC reported on an internet sweep which found that more than half of the businesses reviewed made concerning claims about their environmental or sustainability practices.

For more information on ESG and how Dentons can assist you, please visit our ESG Hub or contact a member of the team.