ASIC wins greenwashing case against Active Super over investments in coal, gambling, oil and Russia

ASIC wins greenwashing case against Active Super over investments in coal, gambling, oil and Russia

Photo: Jeff Griffith, via Unsplash.

A Federal Court has found Active Super misled its members into thinking it had excluded investments in gambling, coal mining, oil tar sands and Russian entities (after the invasion of Ukraine), with the added sting that the $13.6 billion superannuation fund was also culpable of the charge for investments held indirectly.

The result marks another win for the Australian Securities and Investment Commission (ASIC) in its second greenwashing casing filed, following a verdict in its favour against US-based Vanguard Group in March.

The court found that over more than two years, from 1 February 2021 to 30 June 2023, Active Super's trustee LGSS Pty Limited invested in various securities it had claimed were eliminated or restricted by Environment, Social and Governance (ESG) screens.

These include direct interests in Jumbo Interactive (ASX: JIN) and Pointsbet (ASX: PBH), coal miner Coronado Global Resources (ASX: CRN), and oil tar sands companies ConocoPhillips and Shell among others.

Its investment in Russian entities - including Gazprom, Transneft, Mail.ru and Sberbank - were all held indirectly via the Macquarie Emerging Markets Fund and Wellington Emerging Markets Fund, as were its holdings in New Hope Corporation (ASX: NHC) and Whitehaven Coal (ASX: WHC) via exchange-traded funds (ETFs).

Active Super has also indirectly invested in gambling companies via ETFs and the Colonial First State Wholesale Small Companies Fund, including Skycity Entertainment Group (ASX: SKC), Aristocrat Leisure (ASX: ALL), the Lottery Corporation (ASX: TLC), Tabcorp (ASX: TAH) and Crown Resorts.

ASIC had also sought to call out Active Super on its tobacco industry exemptions given it has invested in several companies that provide packaging to the tobacco industry, such as Amcor, but the court did not accept this declaration.

Active Super had asserted that an ordinary or reasonable consumer would draw a distinction between holding shares in a company and indirect exposures through a pooled fund, but this notion was rejected by Justice O’Callaghan.

"I am unable to accept LGSS’s contention that an ordinary and reasonable member of the relevant class would draw a distinction between holding shares in a company and indirect exposures through pooled funds," O'Callaghan said.

"It seems to me that such a consumer would not draw that distinction, including in particular because there is nothing in the Impact Reports or on the LGSS website that suggests that the claims that there was, for example, “No way” Active Super would invest members funds in gambling, tobacco and so on, was to be read subject to a proviso that there was a way in which it would do exactly that, by investing indirectly, not directly. 

"In my view, that distinction is one which no ordinary reasonable consumer would draw."

The representations of concern were on Active Super's website, reports and disclosure documents.

The judge found the use of the terms such as such as “not invest”, “No Way” and “eliminate” were unequivocal and not the subject of any potential qualifications by LGSS’s “Sustainable and Responsible Investment Policy”.

"If such a consumer was told, as they were told, that there was “No way” that LGSS would invest in tobacco or gambling, he or she would not search around for some investment policy that might qualify such statements," O'Callaghan said.

"Absent some indicator on the face it, such as a footnote or asterisk with some accompanying statement that the apparently unqualified language was, in fact, something that was subject to qualifications or limitations, they would have no reason to."

ASIC Deputy Chair Sarah Court said the regulator took this case to "send a strong message to companies making sustainable investment claims that they need to reflect their true position".

"This is a significant outcome which shows our commitment to taking on misleading marketing and greenwashing claims made by companies in the financial services industry," she said.

The court did however find that specific representations in Active Super's Sustainable and Responsible Investment Policy were not misleading with respect to Russian or oil tar sands investments, and the superannuation fund did not engage in misleading representations in relation to its holdings in companies involved in the production of packaging used for tobacco products

The matter has been listed for a further hearing at which the Court will consider the appropriate form of declaratory relief. The Court will consider the pecuniary penalty to impose for the conduct at a later date.

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