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Longo warns more action to come after ASIC launches first greenwashing court case

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The regulator is maintaining its strong focus on the issue of greenwashing in Australia.

Australian Securities and Investments Commission (ASIC) chair Joe Longo has indicated that further action against alleged greenwashing conduct is on the horizon after the regulator kicked off its first court case on the issue earlier this week.

On Monday, ASIC confirmed that it had commenced civil penalty proceedings in the Federal Court against Mercer Superannuation for allegedly making misleading statements about the sustainable nature and characteristics of some of its super investment options.

“We are alleging that sustainable investment options offered by Mercer Superannuation exposed investors to industries the fund said were excluded from the offering, such as coal, alcohol production, and gambling,” Mr Longo told the Australian Institute of Company Directors’ (AICD) Australian Governance Summit on Thursday.

“And this is just one of the investigations we have on foot. We will do what we need to do to make sure entities are not misleading the market.”

Mr Longo noted that ASIC is taking enforcement action where it sees disclosures fall short and where misleading sustainability claims are made by the entities that it regulates. Action against greenwashing was highlighted as one of the regulator’s enforcement priorities for 2023.

To date, over $140,000 in infringement notices in response to concerns about alleged greenwashing have been issued by the regulator against four entities: Tlou Energy, Vanguard Investments Australia, Diversa Trustees, and Black Mountain Energy.

“It is worth noting that greenwashing is not just about environmental claims. It also includes statements about the extent to which products are sustainable or ethical,” Mr Longo noted.

“For example, last year we issued three infringement notices against investment management firm Vanguard Investments for misleading statements about the extent to which their funds applied investment exclusions for tobacco-related investments.”

A survey of over 1,000 consumers commissioned by ASIC this month revealed that only 23 per cent of respondents found information relating to a company’s ESG credentials easy to find.

The survey also determined that 73 per cent of those who invested in shares in the past year had declined to invest in something because of the company’s poor environmental record.

“Reliable disclosure practices are vital to a well-functioning market. The Treasurer has spoken about attracting green capital to Australia as the world decarbonises. This can only happen if Australia’s market is reliable and transparent about sustainability claims,” said Mr Longo.

In the wake of cyber attacks against Optus and Medibank last year, cyber resilience was also highlighted by Mr Longo as a key non-financial risk for businesses alongside greenwashing.

“These attacks exposed the personal data of millions of current and former customers of these companies. And last month we saw an attack on ION, a global technology vendor that provides software to derivatives clearing participants, including a number in Australia. Customers disrupted included some of the world’s biggest banks, brokerages, and hedge funds,” he said.

ASIC’s survey found that 92 per cent of consumers believe that companies need to do more to protect personal data and only 51 per cent said they had a good understanding of how companies do this.

“Recent events should make it clear that cyber preparedness is squarely a board-level issue. How the board ensures sufficient oversight of threats, vulnerabilities, and mitigating controls will set the tone for the cyber resilience of an organisation,” Mr Longo said.